Question

Describe ONE ECONOMIC factor that can influence the value of any currency.

Answer 1

THE RATE OF INFLATION always play an important part in deciding the value of a currency in a country because the rate of inflation often leads to change in the purchasing power of the money which will have multiplier effect like when the purchasing power of the money goes down, the inflation soars, and it will lead to to domestic currency depreciation.

If the inflation rate in a country is high, it would mean that the exchange rate of the country would be depreciating against exchange rate of another country because rising of interest rate are often signals of a poor economy.