When there is a depriciation in the domestic currency it is due to rise in demand of foreign currency or fall in demand? And why?

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Solution

Depreciation takes place due to increase in demand of foreign currency because increase in demand of foreign currency, increases the exchange rate. A rise in the exchange rate implies currency depreciation.

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Similar questions

State any two factors that explain expansion of demand for a foreign currency in response to a fall in its price (in terms of the domestic currency).

State any two factors that explain the contraction of supply of foreign currency when its price in terms of the domestic currency falls.

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