Question : A country with a trade surplus is likely to experience:

Option 1: Appreciation of its currency
 

Option 2: Depreciation of its currency
 

Option 3: No impact on its currency

Option 4: A fixed exchange rate

Question : A decrease in interest rates in a country is likely to result in:

Option 1: Appreciation of the domestic currency
 

Option 2: Depreciation of the domestic currency
 

Option 3: No impact on the exchange rate

Option 4: Unpredictable fluctuations in the exchange rate

Question : Assertion: Appreciation of a country's currency can lead to a decrease in its inflation rate.

Reason: A stronger currency reduces the cost of imported goods, thereby lowering inflationary pressures.

Option 1: True, as imported goods become relatively cheaper, reducing inflationary pressures.
 

Option 2: True, only if the country has a high dependence on imported goods.
  

Option 3: False, as currency appreciation has no impact on a country's inflation rate.

Option 4: False, as currency appreciation leads to higher inflation due to increased purchasing power.

Question : Currency appreciation can negatively impact a country's ________, as it makes the country's exports more expensive.

Option 1: trade balance
 

Option 2: foreign investment
 

Option 3: inflation rate

Option 4: unemployment rate

Question : What is the impact of a stronger domestic currency on a country's imports and exports?

Option 1: Increase in imports, decrease in exports
  

Option 2: Decrease in imports, increase in exports
   

Option 3: Increase in imports, increase in exports

Option 4: Decrease in imports, decrease in exports