Given a two-country world,assume Canada and Sweden devalue their currencies by 20 percent.This would result in:
A) An appreciation in the Canadian currency
B) An appreciation in the Swedish currency
C) An appreciation in both currencies
D) An appreciation in neither currency

Question

Quizplus · Accepted Answer

If both Canada and Sweden devalue their currencies by 20 percent, there will be no relative change in their currency exchange rate. This means that neither currency will appreciate in relation to the other. Therefore, the correct choice is D, an appreciation in neither currency.

Given a Two-Country World,assume Canada and Sweden Devalue Their Currencies