4 Imports tend to fall whenever a nations currency appreciat

4. Imports tend to fall whenever a nation\'s currency appreciates because foreign products become more expensive to domestic consumers. Is the statement true or false? Explain your answer.

Solution

Assuming that a Nation A\'s currency appreciates. As a result, nation A now has to pay a lower amount in order to buy goods and services from nation B.

Currency appreciation makes the nation\'s currency stronger vis-a-vis another currency and will thus make imports cheaper and lowers inflation. This will lead to an increase in imports as it becomes cheaper for the domestic consumers.

thus, the above statement is FALSE.