Exchange rates are affected by each nation's relative position in the business cycle.

Question

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When a country's economy is strong, their currency tends to appreciate in value relative to other currencies. This is because investors are attracted to the country's higher interest rates and potential for higher returns. Conversely, when a country's economy is weak and interest rates are low, their currency may depreciate relative to other currencies. Therefore, the relative position in the business cycle can have an impact on exchange rates.

Exchange Rates Are Affected by Each Nation's Relative Position in the Business