If the United Kingdom devalues the pound and both exports and imports are measured in pounds, what happens to the UK's trade balance during the currency adjustment period?

Multiple choice question for Exchange-Rate Adjustments And The Balance of. Select an option, then review the explanation below.

Explanation

When exports and imports are both denominated in pounds, a devaluation does not alter the trade balance during the currency adjustment period because the relative values remain the same.

Practice related questions from the same subject.

1.What does empirical research suggest about the impact of currency depreciation on a country's trade balance?
2.What term describes how quickly domestic and foreign prices respond to a devaluation in the short term?
3.The shorter the ______ period for pass-through, the ______ the beneficial balance of trade effects on the volume of goods exchanged will be observed.
4.When export agreements are denominated in foreign currency and import agreements are in domestic currency, what is the impact of a dollar depreciation during the contract period?
5.What happens to U.S. import prices when there is complete currency pass-through following a 10% depreciation of the dollar?

If the United Kingdom devalues the pound and both exports and imports are measured in pounds, what happens to the UK's trade balance during the currency adjustment period?

Explanation

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