A high rate of inflation tends to worsen balance of payments because:

Question

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prices of imported goods fall and hence more is imported

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prices of imported goods rise

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prices of exported goods rise making exports less competitive

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prices of exported goods fall and hence less amount is obtained in terms of foreign exchange

1.	A high rate of inflation tends to worsen balance of payments because:
A.	prices of imported goods rise
B.	prices of exported goods rise making exports less competitive
C.	prices of imported goods fall and hence more is imported
D.	prices of exported goods fall and hence less amount is obtained in terms of foreign exchange
Answer» C. prices of imported goods fall and hence more is imported

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