A country deliberately keeps the value of its currency low under the managed floating system.’’ Discuss briefly how it will affect the exports of the country.
Answers
Answer :
Explanation :
If a country deliberately keeps the value of its currency low under the managed floating system, it can have a positive effect on the exports of the country.
A low-valued currency makes the country's exports cheaper in foreign markets, which can increase the demand for those exports. This is because foreign buyers can purchase more units of the country's exports for the same amount of their own currency, making the exports more attractive and competitive. As a result, the country's export revenues may increase, leading to economic growth and development.
On the other hand, a low-valued currency can also make imports into the country more expensive, as it takes more units of the country's currency to purchase the same amount of foreign goods. This can lead to higher prices for imported goods, which may be passed on to consumers.
Overall, a country deliberately keeping the value of its currency low under the managed floating system can have both positive and negative effects on the country's trade balance. While it may stimulate exports, it can also lead to higher costs for imported goods.
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