Start practising
Practice mode Budget Deficits And The Trade Balance

Which statement about the market for foreign currency exchange is correct?

Correct answer D. An increase in Pakistan's net capital outflow increases the supply of rupees and the rupee depreciates

Explanation

When Pakistanis buy more foreign assets, they sell rupees to obtain foreign currency, increasing the supply of rupees and causing the rupee to depreciate.

Report a problem

Answer checked How we write and check questions

Tip: press A, B, C or D to answer, and N for the next question.

Advertisement

More Budget Deficits And The Trade Balance questions

See all
Question 02 Budget Deficits And The Trade Balance

Political instability leads Russians suddenly to buy UK assets instead of Russian assets. What happens to the value of the pound and to UK net exports?

Correct answer A. The pound appreciates, and UK net exports fall

Open question
Advertisement
Question 03 Budget Deficits And The Trade Balance

What is the effect of an increase in private saving in Pakistan?

Correct answer B. It increases Pakistan's net exports and net capital outflow by the same amount

Open question

Discussion

Have a question about this answer?

Your email address will not be published. Required fields are marked *

Links and website addresses are not allowed in comments.