ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An economy experiencing growth results in a currency appreciating, and the exchange rate adjusts accordingly. The country with the weakening economy may experience currency depreciation, which also has an effect on the exchange rate.

Detailed explanation-2: -If the dollar appreciates (the exchange rate increases), the relative price of domestic goods and services increases while the relative price of foreign goods and services falls. 1. The change in relative prices will decrease U.S. exports and increase its imports.

Detailed explanation-3: -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-4: -Appreciation of domestic currency means lower price of foreign currency in terms of domestic currency. This increases the price of domestic goods for foreign buyers. This means imports become cheaper. As a result the demand for imports may rise.