MENU
Question -

If inflation is higher in country A than in country B, and the exchange rate between the two countries is fixed. What is likely to happen to the trade balance between the two countries?



Answer -

The exports from country B to country A will go up in this situation resulting in improvement or surplus trade balance for B. But due to higher price in country A, its imports will increase for country B and it will lead to deficit in trade balance for country A.

Comment(S)

Show all Coment

Leave a Comment

Free - Previous Years Question Papers
Any questions? Ask us!
×