ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Changes in relative inflation rates can affect international trade activity.
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Changes in relative inflation rates influences the demand for and supply of currencies
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Changes in relative inflation rates can affect exchange rates.
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Changes in relative inflation rates does not influences to increase the exchange rate of foreign currencies.
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Detailed explanation-1: -When inflation is higher, this tends to have a depressing affect on the value of a country’s currency. This is because increased inflation reduces the currency’s buying power, which weakens it against other currencies. The impact of increasing inflation on currency conversion rates is usually downwards.
Detailed explanation-2: -Exchange rates, which give the price of a country’s currency relative to foreign currencies, fluctuate based on global market dynamics. These fluctuations can affect domestic inflation rates.
Detailed explanation-3: -Higher inflation can also impact exports by having a direct impact on input costs such as materials and labor. These higher costs can have a substantial impact on the competitiveness of exports in the international trade environment.
Detailed explanation-4: -Interest and inflation rates. Inflation is the rate at which the cost of goods and services rises over time. Current account deficits. Government debt. Terms of trade. Economic performance. Recession. Speculation. 06-Sept-2022