Which factor is likely to lead to a depreciation of a nation's currency exchange rate?

Multiple choice question for Basic of Economics. Select an option, then review the explanation below.

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A rise in foreign demand for the country's exported goodsA surge in the country's demand for imported productsA larger amount of foreign investment entering the countryNone of the options listed

Explanation

When a country increases its demand for imports, it typically needs to exchange more of its own currency for foreign currencies, leading to a decrease in its currency's value. Conversely, higher demand for exports or greater capital inflows tend to strengthen the currency.

Practice related questions from the same subject.

1.Which of the following best describes deflation?
2.Under what condition can two nations benefit from engaging in international trade?
3.Which of the following represents a legitimate form of currency?
4.Which political ideology is best summarized by the phrase, "From each according to his ability, to each according to his needs"?
5.Which type of currency experiences a decline in its exchange rate due to a continuous balance of payments deficit?

Which factor is likely to lead to a depreciation of a nation's currency exchange rate?

Explanation

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