If the people thought that many banks in a certain country were at or near the point of bankruptcy,then that country's real exchange rate
A)and net exports would rise.
B)would rise and its net exports would fall.
C)would fall and its net exports would rise.
D)and its net exports would fall.

Question

Quizplus · Accepted Answer

If people think that many banks in a certain country are at the point of bankruptcy, it would create a sense of uncertainty and reduce confidence in that country's economy. As a result, foreign investors would withdraw their investments, causing a decrease in demand for that country's currency, thereby reducing the exchange rate. However, a decrease in exchange rate would make that country's goods cheaper for foreign buyers, so there would be an increase in the demand for that country's exports, leading to an increase in net exports.

If the People Thought That Many Banks in a Certain