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Which of the following will cause a nation's currency to depreciate? a) Economic downturns, especially in...

Which of the following will cause a nation's currency to depreciate?

a) Economic downturns, especially in times of depression

b) An increase in its price level (inflation)

c) An increase in the interest rate

d) All of the above

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Answer #1

Answer - All of the above

Reason - A currency depreciates when the economy is not performing well or there is instability in the economy which is causing it to import more than it can export or economic downturn, severe depression in market values, recessionary periods, increasing inflation rate causing price level to increase, increase in interest rate etc. All these factors contribute in making a currency weaker over foreign currency and causes the domestic currency to depreciate.

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