Influence Of Exchange Rate On GMEOs

Question 1

What happens to import prices when a currency depreciates?

Answer 1

Foreign goods are more expensive

Question 2

What happens to the cost of raw materials as a currency depreciates?

Answer 2

More expensive

Question 3

What happens to interest rates if a currency depreciates?

Answer 3

May be risen to curb the inflation caused by

Question 4

What happens to investment if a currency isn’t stable?

Answer 4

It can discourage investment as future profitability is uncertain

Question 5

What happens to consumption if a currency depreciates?

Answer 5

Consumers may prefer domestic goods

Question 6

What happens to income distribution if a currency depreciates?

Answer 6

It will worsen as depreciation can cause inflation, which affects lower income households more as essential goods become more expensive

Question 7

What happens to economic growth if a currency depreciates?

Answer 7

Exports are more competitive so growth is stimulated

Question 8

What happens to balance of payments if a currency depreciates?

Answer 8

Improved it as exports increase

Question 9

What happens to unemployment level if currency depreciates?

Answer 9

Unemployment decreases as export industries expand so more jobs are required