The currency in country X is the Krone while country Y uses the Euro. Country Y has recently experienced an increase in its exchange rate with Country X. Which of the following effects is likely to result in Country Y?
A、A stimulus to exports in Country Y
B、An increase in the costs of imports from Country X
C、Reducing demand for imports from Country X D
A、reduction in the rate of cost push inflation
A、A stimulus to exports in Country Y
B、An increase in the costs of imports from Country X
C、Reducing demand for imports from Country X D
A、reduction in the rate of cost push inflation
【参考答案及解析】
Rationale: An increase in the exchange rate makes a country's exports more expensive to overseas buyers, and importscheaper： it therefore has the opposite of the first three effects. The lower cost of imports, however, is likely to reduce therate of domestic inflation.Ways in: You could group options B and C together (increased cost = reduce demand): since both cannot be the answer, and there is only one answer, neither of these options can be correct. This gets you quite a long way towards the solution …So if you don't know an answer, don't panic: logic can often help!
Rationale: An increase in the exchange rate makes a country's exports more expensive to overseas buyers, and importscheaper： it therefore has the opposite of the first three effects. The lower cost of imports, however, is likely to reduce therate of domestic inflation.Ways in: You could group options B and C together (increased cost = reduce demand): since both cannot be the answer, and there is only one answer, neither of these options can be correct. This gets you quite a long way towards the solution …So if you don't know an answer, don't panic: logic can often help!