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Chapter 16: Q.14 (page 406)

What does it mean to say that a currency

appreciates? Depreciates? Becomes stronger? Becomes weaker?

Short Answer

Expert verified

Currency appreciation means a growth in the importance of one currency over another currency.

Step by step solution

01

Concept of Appreciation

Appreciation implies development in the significance of speculation. For exchanging rate, appreciation remains as the development in the worth of the homegrown money as far as unfamiliar monetary standards. This increment makes the domestic currency solid on the planet economy and subsequently, appreciation is likewise called fortifying.

02

Concept of Depreciation

Depreciation refers to the fall in the worth of a resource. For monetary forms, the decline in the worth of the homegrown money as far as unfamiliar monetary standards are alluded to as deterioration. The fall in the worth makes the domestic currency generally more fragile, consequently, it is otherwise called debilitating.

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Most popular questions from this chapter

Suppose a country has an overall balance of trade so that exports of goods and services equal imports of goods and services. Does that imply that the country has balanced trade with each of its trading partners?

Does an expectation of a stronger exchange rate in the future affect the exchange rate in the present? If so, how?

Suppose that political unrest in Egypt leads financial markets to anticipate a depreciation in the Egyptian pound. How will that affect the demand for pounds, supply of pounds, and exchange rate for pounds compared to, say, U.S. dollars?

A central bank can allow its currency to fall indefinitely, but it cannot allow its currency to rise indefinitely. Why not?

List some advantages and disadvantages of the different exchange rate policies.
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