If a Country with High Unemployment, a Balance of Payments

Multiple Choice

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

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