When a nation's currency depreciates, the country might
A)have an inflation rate that exceeds the inflation rate in nations with which it trades.
B)be responding to a decrease in the domestic demand for foreign currencies.
C)have an inflation rate below the inflation rate in nations with which it trades.
D)be responding to an increase in the demand for its currency.

Question

Quizplus · Accepted Answer

When a nation's currency depreciates, it often means that the inflation rate in that country is higher than in the countries it trades with, making its goods more expensive and less attractive to foreign buyers, leading to a decrease in currency value.

When a Nation's Currency Depreciates, the Country Might