The foreign price effect holds that a rise in price level will make domestic goods relatively more expensive, discouraging exports and encouraging imports.
By depreciating the home currency, exports can be increased while imports are decreased. In order to lower the cost of domestic goods and services and ultimately boost net exports, governments weaken their currencies.
Increased output and higher cost levels will compel an increase in the product's pricing.
The state of the nation: Expect higher product costs in the near future. In recent weeks, stories about soaring food prices have dominated the news. Green vegetables and other fresh food have reportedly seen a 200 percent price increase, while basic essentials like chicken and eggs have also gone up in price.
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