what is likely to happen to the trade balance between the two countries?
3 views
0 votes
0 votes
If inflation is higher in country A than in Country B, and the exchange rate between the two countries is fixed, what is likely to happen to the trade balance between the two countries?
User Avatar
by
12.8k points

1 Answer

0 votes
0 votes
 
Best Answer
The exchange rate is one of the most important determinants of a country's trade level. Inflation in country A is higher than in country B. Because the exchange rate is fixed, exporting goods to nation A benefits country B. Similarly, importing items from nation B is beneficial to country A. Exporting commodities to nation B, on the other hand, would be costly for country A. As a result, compared to country B, country A will have a trade imbalance since it will import more items than it exports. Nation B will buy fewer commodities from country A than country A sells. As a result, country B has a trade surplus.
User Avatar
by
12.8k points

Related questions

1 answer
0 votes
0 votes
2 views
1 answer
1 vote
1 vote
7 views
1 answer
0 votes
0 votes
5 views
1 answer
0 votes
0 votes
4 views
1 answer
0 votes
0 votes
6 views
1 answer
0 votes
0 votes
9 views
WELCOME TO ANSWER AVENUE, WHERE YOU CAN ASK QUESTIONS AND RECEIVE ANSWERS FROM OTHER MEMBERS OF THE COMMUNITY.

Categories