Do nothing

• What role do floating exchange rates play in the economy?

  They act as a self-correcting mechanism.
• What happens to a currency when there is a higher level of imports?

  The currency depreciates.
• How does currency depreciation affect imports and exports?

  Imports decrease and exports increase.
• What is the effect of decreased imports and increased exports on the trade deficit?

  It improves the deficit.
• What external factors might prevent a currency from depreciating?

  Various external economic conditions.
• What is a potential consequence of a long self-correction period for the economy?

  Many domestic industries may go out of business.
• How does a prolonged self-correction period affect firm investment?

  It causes firms to delay investment in the economy.