Suppose, due to political instability, Russians suddenly choose to purchase UK assets as opposed to Russian assets Which of the following statements is true regarding the value of the pound and UK net exports ?
Correct answer: B. The pound appreciates, and UK net exports fall
- A. The pound appreciates, and UK net exports rise
- B. The pound appreciates, and UK net exports fall
- C. The pound depreciates, and UK net exports rise
- D. The pound depreciates, and UK net exports fall
Explanation
Russian purchases of UK assets increase demand for pounds, causing the pound to appreciate. Appreciation makes UK goods more expensive to foreigners and imports cheaper, so UK net exports fall.
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