Asksia AI LOGO

Sia

Question
Macroeconomics
Posted 3 months ago
Maxistan and Theopolis are trading partners. The currency of Maxistan is the peso and the currency of Theopolis is the card.

What happens to the value of each currency if Maxistan places a tariff on exports from Theopolis?

Choose 1 answer:
(A) The card depreciates and the peso appreciates.
(B) Both currencies depreciate.
(C) The card is unaffected and the peso appreciates
(D) Both currencies appreciate.
(E) The card depreciates and the peso is unaffected.
Sign in to unlock the answer
Answer from Sia
Posted 3 months ago
A
Key Concept
Tariff Impact on Currency Values
Explanation
When Maxistan imposes a tariff on exports from Theopolis, it makes Theopolis's goods more expensive in Maxistan, reducing the demand for Theopolis's currency (the card) to pay for those goods. This can lead to a depreciation of the card. Conversely, as Maxistan's goods become relatively cheaper, the demand for the peso may increase, leading to an appreciation of the peso.

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