If a country is a net importer, what will happen to the value of the domestic currency in the long run?
1 Answer
Nov 2, 2015
The value of the domestic currency will fall.
Explanation:
The country becomes a net importer.
This condition goes on for several years.
The domestic country has to make a lot of payment in terms of foreign currency.
As the domestic country's demand for foreign currency goes up,
it has to part with more units of domestic currency in order to get one unit of foreign currency.
Ultimately it will lead to a fall in the external value of the domestic currency.
