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Economics (AS & A Level) · Oct / Nov 2023 · Paper 32 · Question 24

9708Exchange rates

The exchange rate of an economy appreciates. Assuming that the Marshall–Lerner condition holds in this economy, what is the likely outcome for imported inflation and unemployment?

  1. Aimported inflation: falls; unemployment: falls
  2. Bimported inflation: falls; unemployment: rises
  3. Cimported inflation: rises; unemployment: falls
  4. Dimported inflation: rises; unemployment: rises

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Correct answer: B. imported inflation: falls; unemployment: rises

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