Country A is experiencing productivity growth. When compared with other countries with lower productivity growth, we expect to see wages and incomes _______ and its exchange rate _______.
A) fall; appreciate
B) rise, appreciate
C) fall; depreciate
D) rise; depreciate

Question

Quizplus · Accepted Answer

When a country experiences productivity growth, it becomes more competitive, thereby increasing its exports and attracting more foreign investments. This increased demand for the country's goods and services leads to increased wages and incomes. Additionally, the increased demand for the country's currency leads to an appreciation of its exchange rate.

Country a Is Experiencing Productivity Growth