Everything else held constant,increased demand for a country's exports causes its currency to ________ in the long run,while increased demand for imports causes its currency to ________.

Question

Quizplus · Accepted Answer

Increased demand for a country's exports leads to an increase in demand for that country's currency, as foreign buyers need to purchase its currency to pay for the goods. This increased demand for the currency causes its value to appreciate. On the other hand, increased demand for imports means that the country is buying more goods from foreign countries and thus needs to exchange more of its currency for foreign currency. This leads to greater supply and less demand for the country's currency, causing its value to depreciate.

Everything Else Held Constant,increased Demand for a Country's Exports Causes