According to Trade Theory

question 149

Multiple Choice

According to trade theory

• A) traders need to know the exchange rate between their own currency and that of the nation they are considering trading with, before they can decide whether it is advantageous to import, export, or buy locally.
• B) if a currency's exchange rate strengthens, then its exporters will no longer be able to profitably export their products.
• C) devaluation of a currency will automatically cause a nation's products to be price competitive in international markets.
• D) high-cost labor will automatically cause a country to be uncompetitive in export markets.
• E) devaluation of a country's currency will cause domestic prices to decrease.

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Definitions:

Inflation Rate

measures the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Consumer Price Index

An indicator that assesses the typical shift through time in the expenses urban purchasers face for a predetermined array of consumer items and services.

Inflation Rate

The percentage increase in the general level of prices for goods and services over a period.

Consumer Price Index

A measure of the average shift in costs for various consumer items and services bought by urban dwellers, the Consumer Price Index reveals how these prices change over time.