Exchange rate of which of the following currencies falls because of persistent balance of payments deficit ?
Correct answer: D. Soft currency
- A. Gold currency
- B. Hard currency
- C. Silver currency
- D. Soft currency
Explanation
A persistent balance-of-payments deficit increases demand for foreign currency and weakens the domestic currency, making it a soft currency. Hard currencies are generally strong and widely accepted in international transactions.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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