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CFA Level 1
Economics

Impact of Inflation on Currency Depreciation

Medium International Economics Exchange Rates

In a floating exchange rate system, the value of a currency is determined primarily by market forces. Let’s consider a country, Country X, that experiences a significant increase in its inflation rate relative to other countries. This change results in a decrease in foreign demand for Country X's exports. Which of the following outcomes is most likely to occur as a result of this situation?

Hint

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