ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Appreciation is directly linked to demand. If the value appreciates (or goes up), demand for the currency also rises. In contrast, if a currency depreciates, it loses value against the currency against which it is being traded.

Detailed explanation-2: -Currency appreciation is the increase in the value of one country’s currency relative to another country’s currency. An increase in government spending or a cut in taxes as well as an increase in investment demand typically causes currency to appreciate.

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: -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.