A countries currency will appreciate when its: a) imports rise in relation to it exports b) current account moves from surplus to deficit c) exports rise in relation to imports d) capital account is in surplus but not changing . . . . . . . answer is c) but i am wondering why not a)? if exports are rising, doesnt that imply the countries currency is getting stronger relative to other countries, hence imports are cheaper??
When export rises that means that demand for country’s currency rises as well (other countries will need it to pay for goods and services that they buy from exporting country). If demand for currnecy is higher it will appreciate (will be more expensive for foreign countries to buy it).
sorry, i meant imports rising, because they are cheaper because the local currency is stronger relative to other currencies, hence overseas products are cheaper relative to domestic…
i think that the question is what will happen when exports rise in relation to imports. this will cause currency appreciation. they don’t ask what will happpen if currency appreciate.