Practice mode Macroeconomic Issues and Analysis

If incomes in Pakistan grow faster than in most other countries, what will tend to happen to the exchange value of its currency?

Correct answer A. Depreciate

Explanation

Faster income growth leads Pakistani residents to buy more imports, while exports grow more slowly. Paying for the extra imports increases the supply of rupees, pushing the currency down.

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If incomes in Pakistan grow faster than in most other countries, what will tend to happen to the exchange value of its currency?

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If incomes in Pakistan grow faster than in most other countries, what will tend to happen to the exchange value of its currency?

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