Question

QUESTION 7 Select all that are true given an increase in exports from the domestic economy: Domestic economic growth slows The relative price of exports falls Investment from the domestic economy to the foreign economies decreases The domestic currency depreciates QUESTION 8 The current account moves in to surplus, select all of the following that might result: The home price of goods increases Assuming no change in foreign reserves, the domestic interest rate rises Demand for DC increases Output increases

Answer 1

7.

Investment from domestic economy to the foreign economies decrease

Domestic currency depreciates

Reason: As exports increase, supply of domestic currency increases, leading to a currency depreciation

Also, as exports increase, investment in domestic economy increases as firms prefer to increase investment in home country and make money from exports

8.

Output increases (as trade increases and export income increases)