ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value.

Detailed explanation-2: -Higher interest rates can increase a currency’s value. They can attract more overseas investment, which means more money coming into a country and higher demand for the currency.

Detailed explanation-3: -An increase in the demand for a currency creates a rightward shift of the demand curve, ultimately causing a rise in the exchange rate and increasing the value of the currency demanded. Conversely, a fall in demand would shift the demand curve left and lead to a decline in the currency value.

Detailed explanation-4: -A weaker domestic currency stimulates exports and makes imports more expensive; conversely, a strong domestic currency hampers exports and makes imports cheaper.