PRC-3 · Chapter 20 · Question 15 of 30
Assume that the value of the Pakistani Rupee (PKR) significantly depreciates against the US Dollar. Assuming demand for exports is price elastic, what is the most likely short-term effect on Pakistan's international trade?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Exports will become cheaper for foreigners and increase in volume
Explanation
A depreciation makes domestic goods cheaper in foreign currency terms, which generally stimulates foreign demand and increases the volume of exports.
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