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Which of the following have substantially equivalent effects on a nation's volume of exports and imports? Exchange rate appreciation and a decrease in the domestic supply of money Exchange rate appreciation and domestic deflation Exchange rate depreciation and domestic inflation Exchange rate depreciation and domestic deflation

Answer :

Exchange rate depreciation and domestic deflation have substantially equivalent effects on a nation's volume of exports and imports.

What is  deflation?

Customers' purchasing power grows as costs for goods and services decline across the board. It is the opposite of inflation and is occasionally seen as being bad for a nation since it may signal an economic downturn that might cause a recession or depression. Advantageous conditions, including technological breakthroughs, can also lead to deflation.

Deflation may be worse than inflation if it results from negative factors like a lack of demand or a reduction in market efficiency. Deflation may be preferable to inflation if it results from favorable conditions like improvements in technology that cut the cost of goods and services.

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