Question : Which of the following factors can cause a currency depreciation? Select the most appropriate answer.
Option 1: High-interest rates
Option 2: Increase in exports
Option 3: Political instability
Option 4: Trade surplus
Correct Answer: Political instability
Solution : The correct answer is c) Political instability
Political instability, such as changes in government, civil unrest, or geopolitical tensions, can lead to a loss of confidence in a country's economy and its currency. Investors may perceive political instability as a risk and seek to sell off the country's currency, leading to its depreciation.
It's important to note that currency exchange rates are influenced by a variety of factors, including economic fundamentals, monetary policy, market sentiment, and global economic conditions. The interplay of these factors can result in currency appreciation or depreciation.
Question : Which of the following factors can lead to a currency depreciation?
Option 1: Increase in exports
Option 2: Rise in interest rates
Option 3: Political stability
Question : Which of the following factors can cause a currency appreciation?
Option 1: Increase in imports
Option 2: Decrease in interest rates
Option 4: Trade deficit
Question : Which of the following factors can contribute to the depreciation of a country's currency?
Option 1: Low interest rates.
Option 2: Weak economic performance.
Option 3: Political instability.
Option 4: All of the above.
Question : Which of the following factors does not affect foreign exchange rates?
Option 1: Inflation rates
Option 2: Interest rates
Option 4: Weather conditions
Question : Which of the following are the effects of Depreciation of domestic currency?
Option 2: Decrease in imports
Option 3: Increase in national income
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile