An increase in demand for a country's _______ will cause its currency to appreciate in the long run,while an increase in demand for its _______ will cause its currency to depreciate.

Question

Quizplus · Accepted Answer

An increase in demand for a country's exports will cause an increase in the demand for its currency, which will appreciate in the long run. This is because foreigners will need to buy the country's currency to obtain its exports. Conversely, an increase in demand for a country's imports will mean an increase in demand for the foreign currency needed to buy those imports, driving down the value of the country's currency. Therefore, the correct answer is D, exports; imports.

An Increase in Demand for a Country's _______ Will Cause