ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Depreciate
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Appreciate
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Peg
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None of the above
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Detailed explanation-1: -Does Inflation Depreciate Currency? In general, inflation tends to devalue a currency since inflation can be equated with a decrease in a money’s buying power.
Detailed explanation-2: -On the one hand, devaluation happens when a government makes monetary policy to reduce a currency’s value; on the other hand, depreciation happens as a result of supply and demand in a free foreign exchange market. Devaluation is a decision that makes a currency lose value.
Detailed explanation-3: -Economic fundamentals, interest rate differentials, political instability, or risk aversion can cause currency depreciation. Orderly currency depreciation can increase a country’s export activity as its products and services become cheaper to buy.