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Question

A weak currency is:

i. Good for exports from the country having weak currency

ii. May create difficult conditions for trade with the country having weak currency

iii. Good for import in the country having weak currency

A Only i and ii Correct Answer Incorrect Answer
B Only i and iii Correct Answer Incorrect Answer
C Only ii and iii Correct Answer Incorrect Answer
D Only i Correct Answer Incorrect Answer
E None of these Correct Answer Incorrect Answer

Solution

Weak currency encourages exports as the exporter realises more value of the exports. Weak currency reduces terms of trade as the country has to give more of the exporting commodity to get a specific unit of the importing commodity. Weak currency reduces the price of domestic goods in the international market.

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