An increase in which of the following factors (from the perspective of the domestic country) would cause a depreciation of the domestic currency in the long run?
A) domestic interest rate
B) relative price level
C) relative export demand
D) all of the above

Question

Quizplus · Accepted Answer

An increase in the relative price level of the domestic country compared to foreign countries makes domestic goods more expensive for foreigners, reducing demand for domestic exports. This decrease in demand for exports can lead to a depreciation of the domestic currency as fewer foreign buyers convert their currency into the domestic currency to buy goods.

An Increase in Which of the Following Factors (From the Perspective