Increased demand for a country's ________ causes its currency to appreciate in the long run,while increased demand for ________ causes its currency to depreciate.

Question

Quizplus · Accepted Answer

The increased demand for a country's exports will lead to an increase in demand for its currency, as foreign countries will need to purchase that currency in order to import those goods. This increased demand for the currency will cause it to appreciate in the long run. Conversely, increased demand for imports means more of the domestic currency will be needed to purchase foreign goods, leading to a decrease in the value of the domestic currency or depreciation. Therefore, options A and B are incorrect. Finally, option D is incorrect because increased demand for exports does not cause depreciation in a currency.

Increased Demand for a Country's ________ Causes Its Currency to Appreciate