Question

Assume Countries A, B, and C produce goods that are substitutes of each other and that these countries engage in trade with each other. Assume that Country A's currency floats against Country B's currency, and that Country C's currency is pegged to B's. If A's currency appreciates against B, then A's exports to C should ____, and A's imports from C should ____.

Answer 1

increase and decrease

Step-by-step explanation:

Here in this case since all three countries are involved in trade with each other and A's currency floats against Country B's currency, and that Country C's currency is pegged to B's also A's currency appreciates against B,

then A's exports to C should increase, and A's imports from C should decrease.