Question

If a country places tariffs on imported goods, then its currency appreciates which increases exports. What is the effect of placing tariffs on imported goods?

1) Currency depreciates which decreases exports
2) Currency appreciates which increases exports
3) Currency remains unchanged
4) Currency fluctuates

Answer 1

Placing tariffs on imported goods can lead to an appreciation in a country's currency, which increases exports.

Step-by-step explanation:

When a country places tariffs on imported goods, it can lead to an appreciation in its currency, which in turn increases exports. “Appreciation” refers to an increase in the value of a country's currency relative to other currencies. This means that the country's currency becomes stronger and can buy more of other currencies. When a country's currency appreciates, it becomes more expensive for other countries to buy its goods and services. As a result, exports from the country increase because its products become relatively cheaper for other countries to purchase

Answer 2

Placing tariffs on imported goods can lead to an increase in a country's currency value, which in turn increases exports.

The correct answer is 2).

Step-by-step explanation:

Placing tariffs on imported goods can have the effect of increasing a country's currency value, which in turn increases exports. When a country imposes tariffs on imported goods, it makes those goods more expensive for domestic consumers compared to domestically produced goods.

This leads to an increase in demand for domestically produced goods, which increases the value of the country's currency. As a result, exports become more competitive in international markets and increase.