Question

In: Economics

In the case of many goods traded, a country can improve its comparative advantage if it decreases the value of its currency

True or False, and Explain why

In the case of many goods traded, a country can improve its comparative advantage if it decreases the value of its currency

Solutions

Expert Solution

Answer- False, as because currency Devaluation help boost trades that too only exports as other countries will buy more as they will a less amount of their currency in exchange moreover it can help in shrinking trade deficits and reducing the interest payments on its outstanding government debts but it will not help to achieve a comparative advantage.

Comparative advantage refers to a situation when a country is able to produce a particular good at a less opportunity cost and currency Devaluation will not help in this.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Q 38, 42, 44 Comparative advantage implies that a country will A. export those goods in...
Q 38, 42, 44 Comparative advantage implies that a country will A. export those goods in which the country has a comparative advantage. B. import those goods in which the country has a comparative advantage. C. export those goods in which the country has an absolute advantage compared to its trading partner. D. import those goods in which the country has an absolute advantage compared to its trading partner. ------------------------------------------------------------------------------------------------------ An income tax​ ________ potential GDP by shifting the labor​...
Explain this difference between absolute advantage and comparative advantage. If a country has an absolute advantage...
Explain this difference between absolute advantage and comparative advantage. If a country has an absolute advantage in everything, can it still benefit from trade? Why or why not?
when a country has a comparative advantage in the production of a good
when a country has a comparative advantage in the production of a good
Compare absolute advantage with comparative advantage. How does the size of a country and the diversity...
Compare absolute advantage with comparative advantage. How does the size of a country and the diversity of its economy impact on these theories?
Can comparative advantage be created? If yes, explain how countries can create comparative advantage. In your...
Can comparative advantage be created? If yes, explain how countries can create comparative advantage. In your answer you need to refer to the role of government, access to external markets, and historical accidents as the factors that have played a major role. What are the prominent examples of such cases? Give at least 3 global examples.
An African country has a policy of fixing the exchange rate value of its currency to...
An African country has a policy of fixing the exchange rate value of its currency to the U.S. dollar. Banks in the country have a business model in which the banks pay competitive interest rates to attract U.S. dollar deposits, and the banks then use these funds to make higher-interest loans denominated in the local currency. How likely would an unexpected devaluation of the local currency be to lead to banking crisis? Why?
When a country has a comparative advantage in the production of a good, it means that...
When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFs) for Freedonia and Lamponia. Both countries produce lemons and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and...
Suppose that country A pegs its currency to country B’s currency, and A has excessively high...
Suppose that country A pegs its currency to country B’s currency, and A has excessively high inflation. Country B is only likely to help A if: a. both are members of the International Monetary Fund. b. country B has a free trade agreement with country A. c. country B’s output is above its preferred level. d. country B does not trade at all with country A. e. country B’s output is below its preferred level.
If a country ties its currency to a specific foreign currency and allows its holdings of...
If a country ties its currency to a specific foreign currency and allows its holdings of that currency to govern the country's money supply, this arrangement is known as a Select one: a. currency board. b. floating exchange rate. c. monetary union. d. Special Drawing Right.
Find the currency of your home country (India) and describe its value relative to the USD....
Find the currency of your home country (India) and describe its value relative to the USD. . Is it under or over-valued compared to the USD? What problems or benefits do you think this relationship might cause for your country? Why? What problems or benefits do you think this relationship might cause for the US? Governments often intervene (manipulate) in foreign exchange markets to give their currency a more favorable rate. Do some research on the web to see what...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT