Sia
Question
Statistics
Posted 4 months ago
Ghana's currency is the cedi, and assume Ghana has no currency controls. A change in the economy has led to the shift from point to point . India is one of Ghana's top trading partners, and India's currency is the rupee.
What's the impact of this economic change on the values of the cedi and rupee?
Choose 1 answer:
(A) cedi appreciates; rupee depreciates
(B) cedi appreciates; rupee appreciates
(c) cedi is unaffected; rupee appreciates
(D) cedi depreciates; rupee appreciates
(E) cedi depreciates; rupee depreciates
Report a problem
Sign in to unlock the answer
Answer from Sia
Posted 4 months ago
Solution by Steps
step 1
Interpret the graph: The shift from point to point on the SRPC indicates an increase in inflation from 9% to 11% and a decrease in unemployment
step 2
Analyze the impact on the cedi: Higher inflation typically leads to a depreciation of the currency because it reduces purchasing power. Since Ghana has no currency controls, the cedi is likely to depreciate
step 3
Consider the impact on the rupee: If Ghana is one of India's top trading partners and the cedi depreciates, Indian exports to Ghana could become more expensive in terms of cedis, potentially reducing demand. This could lead to the rupee appreciating relative to the cedi
step 4
Combine the effects: The combined effect of steps 2 and 3 suggests that the cedi would depreciate and the rupee would appreciate
Answer
D
Key Concept
Currency value changes due to inflation
Explanation
An increase in inflation typically leads to currency depreciation, and trade relationships can influence the relative appreciation or depreciation of trading partners' currencies.
Not the question you are looking for? Ask here!
Enter question by text
Enter question by image
Upgrade to Asksia Pro
Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.
Unlimited chat query usages
Strong algorithms that better know you
Early access to new release features
Study Other Question