Explain the Effect of Appreciation of Domestic Currency on Imports. - Economics

Explain the effect of appreciation of domestic currency on imports.

Solution

The appreciation of domestic currency refers to an increase in the price of domestic currency related to foreign exchange. For example, $1 = Rs 50 to$1 = Rs 42 indicates that the goods from abroad will be cheaper, and hence, a rise in the demand for imports.

Concept: Concept of Foreign Exchange Rate
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