maxistan and ile are trading partners. maxistan is currently experiencing a recession and, as a result…

maxistan and ile are trading partners. maxistan is currently experiencing a recession and, as a result, investors in ile have less demand for maxistans financial assets. what will happen to the value of iles currency and the value of iles exports as a result of the decreased demand for foreign financial assets? choose 1 answer: a iles currency appreciates; no impact on exports from ile b iles currency appreciates; exports from ile decrease c iles currency depreciates; iles exports increase d there is no impact on iles currency or exports e iles currency depreciates; iles exports decrease

maxistan and ile are trading partners. maxistan is currently experiencing a recession and, as a result, investors in ile have less demand for maxistans financial assets. what will happen to the value of iles currency and the value of iles exports as a result of the decreased demand for foreign financial assets? choose 1 answer: a iles currency appreciates; no impact on exports from ile b iles currency appreciates; exports from ile decrease c iles currency depreciates; iles exports increase d there is no impact on iles currency or exports e iles currency depreciates; iles exports decrease

Answer

Brief Explanations:

When investors in Ile have less demand for Maxistan's financial assets, they will sell Maxistan - denominated assets and convert the proceeds back into Ile's currency. This increases the supply of Maxistan's currency in the foreign - exchange market and the demand for Ile's currency. As a result, Ile's currency appreciates. An appreciation of Ile's currency makes Ile's exports more expensive for foreign buyers (in this case, buyers in Maxistan), so exports from Ile decrease.

Answer:

B. Ile's currency appreciates; exports from Ile decrease