If a country with high unemployment, a balance of payments deficit, and fixed exchange rates decides to abandon its fixed exchange rate and allow its exchange rate to float, which among the following will be a probable effect?

A. Its currency will appreciate, decreasing international competitiveness and leading to a worsening of the current account.
B. Its currency will depreciate, decreasing international competitiveness and leading to an improvement in the current account.
C. Its currency will appreciate, increasing international competitiveness and leading to an improvement in the current account.
D. Its currency will depreciate, increasing international competitiveness and leading to an improvement in the current account.


Answer: D

Economics

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