An economy's international price competitiveness is determined by both its nominal exchange rate and relative cost factors. Which of the following combinations of changes is guaranteed to cause a decrease in the international price competitiveness of a country's exports?
A nominal depreciation of the domestic currency combined with a domestic inflation rate that is lower than that of its trading partners.
A nominal appreciation of the domestic currency combined with a domestic inflation rate that is higher than that of its trading partners.
A nominal depreciation of the domestic currency combined with domestic productivity growth that is higher than that of its trading partners.
A nominal appreciation of the domestic currency combined with domestic productivity growth that is higher than that of its trading partners.
30 exam-style questions on OCR A Level Economics Exchange rates. Each one has a worked solution and a mark scheme showing where the marks go.