High Inflation (Scenario)
Country X primarily exports coffee beans, and in the last two years the demand for coffee beans has caused economic growth in Country X. To accommodate the economic growth, the central bank of Country X increased the nation's money supply. Country X is now experiencing inflation of over 200 percent. A group of economic experts, government representatives, and business owners have gathered for a conference in Country X to discuss the situation.
-Which of the following should be considered before the government takes any action to correct the high rate of inflation?
A) What have been the historical consequences of trade barriers in Country X?
B) What is the current price of coffee in the United States and Europe?
C) What will be the long-term effects of currency depreciation to Country X?
D) What other industries in Country X could replace agriculture?

Question

Quizplus · Accepted Answer

Understanding the long-term effects of currency depreciation is crucial, as it can impact the country's trade balance, foreign investment, and overall economic stability, which are important factors when addressing high inflation.

High Inflation (Scenario) Country X Primarily Exports Coffee Beans, and in the Last