ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When a country’s currency appreciates in relation to foreign currencies, foreign goods become cheaper in the domestic market and there is overall downward pressure on domestic prices. In contrast, the prices of domestic goods paid by foreigners go up, which tends to decrease foreign demand for domestic products.

Detailed explanation-2: -If a currency appreciates it is more valuable; if a currency depreciates it is less valuable. When an exchange rate changes, the value of one currency will go up while the value of the other currency will go down. When the value of a currency increases, it is said to have appreciated.

Detailed explanation-3: -Numerous factors influence exchange rates, including a country’s economic performance, the outlook for inflation, interest rate differentials, capital flows and so on. A currency’s exchange rate is typically determined by the strength or weakness of the underlying economy.

Detailed explanation-4: -The imported goods will become cheaper in a foreign country if the domestic goods tend to become expensive on the international market. This means that a domestic currency can buy a higher value of a foreign currency, ultimately enabling the buyers to buy more international goods.