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WAEC Economics 2016 Question 47

Question 47

Balance of Payments and Exchange Rates

When the international value of a country's currency rises, other things being equal, the country's

  1. A.net exports tend to increase.
  2. B.imports tend to decrease.
  3. C.net exports tend to decrease.
  4. D.exports tend to be stable.
Show the answer and explanation

Answer: C (net exports tend to decrease.)

Explanation

A stronger currency makes exports dearer abroad and imports cheaper at home, so net exports fall.