Identify whether the following situation would lead to an appreciation or depreciation of the dollar. Explain why the currency either appreciates or depreciates.

SOMEONE ASKED 👇


Identify whether the following situation would lead to an appreciation or depreciation of the dollar. Explain why the currency either appreciates or depreciates.

HERE THE ANSWERS 👇

When the exchange rate between two currencies is rising, we can determine whether it has depreciated or realized the interns of the currency. For example, when you want to exchange the dollar into Australian dollars and estimate that one dollar equals 1.25 Australian dollars, but the exchange rate goes up to 1 dollar equals a.5 pounds, then the pound has a value. 1.5. So the dollar has depreciated in value, but else the Australian dollar appreciates against the dollar. Australian citizens switch from buying stock in US companies to buying stock in Australian companies.

This will affect foreign currency demand and supply. When an Australian citizen starts transferring to buy shares, the demand for American dollars will decrease, and an Australian citizen will spend less on stocks for us. The assumption is that the supply of the dollar to an Australian citizen is stable. So the demand side of the dollar is the one that will be affected, which means that the demand for the dollar will decrease.

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