Question

Consider the following statement: ""A country’s currency will appreciate if its inflation rate is less than that of the rest of the world."" This statement is

Answer 1

Answer:

True.

Explanation:

The given assertion would be true as it there arises a situation in which the inflation of a country is comparatively lesser than the inflation rate in the rest of the world, this leads to making the imports cheaper(due to comparative lesser inflation rate) and increased exports as well as the increased foreign currency supply. The increased supply of foreign currency leads to an appreciation in the value of the currency. Therefore, the assertion is true.

Answer 2

Answer: the country currency will appreciate if it inflation is less than that of other country

Explanation: When the inflation rate in a domestic nation is lower than the inflation rates of other countries, that nation’s currency would appreciate against the currencies of those other countries. When consumers (foreign and domestic) purchase more of these goods, they are required to make their payments with the domestic currency. This increases the demand for the domestic currency, thus increasing its value or in other terms, making the currency appreciate.