Currency Appreciation Reduces Net Exports and Employment Growth

Steps:

• Appreciation strengthens the ringgit, making Malaysian exports pricier abroad.
• Export demand falls, while imports become cheaper and rise.
• Net exports decline, reducing aggregate demand in the economy.
• Slower economic activity curbs employment growth.

Why B is correct:

• Currency appreciation worsens the trade balance via reduced exports and increased imports, lowering aggregate demand and thus the rate of employment growth (per Keynesian expenditure model).

Why the others are wrong:

• A: Appreciation likely raises unemployment by contracting export sectors, not declining it.
• C: Imports volume increases due to cheaper foreign goods, not reduces.
• D: Services trade may not improve; appreciation similarly hampers competitiveness in services exports.

Final answer: B