How Does a Decrease in Value of a Country's Currency

question 84

Multiple Choice

How does a decrease in value of a country's currency relative to other currencies affect its balance of trade?

• A)A decrease in value of a country's currency relative to other currencies raises imports,reduces exports,and reduces the balance of trade.
• B)A decrease in value of a country's currency relative to other currencies reduces imports,raises exports,and reduces the balance of trade.
• C)A decrease in value of a country's currency relative to other currencies reduces imports,raises exports,and increases the balance of trade.
• D)A decrease in value of a country's currency relative to other currencies raises imports,reduces exports,and increases the balance of trade.

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Definitions:

Payback Period

The time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.

NPV

Net Present Value; a method used in capital budgeting to assess the profitability of an investment or project, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

NPV

NPV, or Net Present Value, is a financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Cost of Capital

The rate of return a company must earn on its investment projects to maintain its market value and attract funds.