Which of the following will cause a country's currency to depreciate?
A) High interest rates on the currency
B) High inflation rates
C) High account surplus
D) High in-flow of foreign funds

Question

Which of the following will cause a country's currency to depreciate? 
A) High interest rates on the currency 
B) High inflation rates 
C) High account surplus 
D) High in-flow of foreign funds

Quizplus · Accepted Answer

High inflation rates cause a country's currency to depreciate because it reduces the purchasing power of the currency, making exports more attractive but imports more expensive. Higher inflation rates also decrease the country's public confidence, causing a decrease in foreign investment.

Which of the Following Will Cause a Country's Currency to Depreciate