Exchange Rates and the Balance of Payments (id: e42ff69d9)

本题目来源于试卷: Exchange Rates and the Balance of Payments，类别为 IB经济学

[单选题]
What will be the impact of a cxy1 7,zh ju)nac0 kr3aurrent account deficit on the country’s s4,v. p-qksas currency unsqs-.a4 ,spv kder a floating exchange rate system?

A. It will depreciate
B. It will appreciate
C. It will not change
D. Indeterminate


参考答案:  A


本题详细解析:

A

$\underset{‾}{\text{Explanation}}$:
A deficit in the current account implies that outflows exceed inflows. This leads to the supply of currency being greater than its demand.

Consequently, in a floating exchange rate system$\text{—}$where demand and supply for the currency determine the exchange rate$\text{—}$the exchange rate depreciates.

Options B, C, and D are incorrect:

• Option B, as currency appreciates if there is a surplus in the current account
• Option C, as the exchange rate remains unchanged under a fixed exchange rate system
• Option D, as a deficit on the current account causes the currency to depreciate

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