Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 38 - The Balance of Payments, Exchange Rates, and Trade Deficits - Questions - Page 799: 8a

Answer

Disagree

Work Step by Step

Faster economic growth often leads to increased demand for that country’s goods, services, and assets, which can strengthen its currency. Growth may also attract foreign investment, increasing demand for the currency. However, if growth leads to higher imports and trade deficits, it could exert downward pressure—but this is not guaranteed. Therefore faster growth usually appreciates a currency, not depreciates—unless offset by other factors like inflation or trade imbalances. So I disagree with the statement “A country that grows faster than its major trading partners can expect the international value of its currency to depreciate.”
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