ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the domestic currency appreciates, it becomes more expensive for foreigners to purchase the exports of the country. As a result, the number of exported goods reduces and domestics exporters lose out. On the other hand, if the domestic currency appreciates, it becomes cheaper to import products.

Detailed explanation-2: -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-3: -When a country’s exchange rate increases relative to another country’s, the price of its goods and services increases. Imports become cheaper. Ultimately, this can decrease that country’s exports and increase imports.

Detailed explanation-4: -Appreciation of domestic currency occurs when market determined exchange rate falls.It signifies that foreign buyers will be able to buy less from one unit of currency. This makes exports costlier for the foreign buyers. As a result exports are likely to decline.

Detailed explanation-5: -Currency appreciation tends to make imports cheaper because the same amount of local currency can buy more foreign products. Local consumers might find better prices on imported goods, so imports tend to increase.