If international competition becomes stronger, a country’s current account balance will deteriorate. If there are no countervailing influences, how is this expected to influence the exchange rate and domestic cost-push inflation?
- Aexchange rate: appreciate; cost-push inflation: decrease
- Bexchange rate: appreciate; cost-push inflation: increase
- Cexchange rate: depreciate; cost-push inflation: decrease
- Dexchange rate: depreciate; cost-push inflation: increase