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Consider the case of a monetary union with a common currency. one of the member countries,...

Consider the case of a monetary union with a common currency. one of the member countries, Country C, experiences a significantly higher inflation rate than the other member countries. As a result, Country C's real exchange rate, with respect to the other member countries, will------------ and its trade balance is expected to------------in the medium term

1. appreciate; improve

2. appreciate; worsen

3. depreciate; improve

4. depreciate; worsen

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Answer #1

4. Depreciate; worsen

Explanation: Inflation results in a fall in the exchange rate. This results in worsening of the trade balance.

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