Short Answer Type Questions:
Briefly discuss the concepts of currency appreciation and currency depreciation.

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Solution

Currency appreciation is a situation of a fall in exchange rate. Less rupees are needed to buy one dollar. Increase in supply and decrease in demand for foreign exchange cause appreciation of domestic currency.
Currency depreciation is a situation of a rise in exchange rate. More rupees are needed to buy one dollar. Increase in demand and decrease in supply for foreign exchange cause depreciation of domestic currency.

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