Question

if a country, say UK, experiences high inflation relative to U.S., its exporta to the U.S should ______, its imports should _______, and there is ____ pressure on its currency value.

C. Increase;decresease;downward

D.Decrease;increase;downward

Answer 1

If a country, say UK, experiences high inflation relative to U.S., its exports to the U.S should decrease, its imports should increase, and there is downward pressure on its currency value.

.

.

Reason:

Inflation affect imports and exports primarily through their influence on the exchange rate. Higher inflation typically leads to higher interest rates, and this leads to a weaker currency. Higher inflation can also affect exports by having a direct impact on input costs such as materials and labor.Inflation leads reduction in exports due to goods and services prove more costlier in international market ​​​​​​.