Inflation plays a major role in determining whether a currency is appreciating or depreciating.

Question

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Inflation refers to the increase in the general price level of goods and services in an economy. When a currency experiences high inflation, its purchasing power declines, which can lead to a depreciation of the currency. On the other hand, if a currency experiences low inflation, its purchasing power strengthens, and the currency may appreciate in value. Therefore, inflation is a significant factor in determining whether a currency is appreciating or depreciating.

Inflation Plays a Major Role in Determining Whether a Currency