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The Cause and Consequences of Falling Rupee
What is Depreciation of Currency?
Under the present circumstances, the exchange value or exchange rate, i.e., the rate at which a country’s currency exchanges for currencies of other countries depends on its supply in relation to its demand in that market.
According to economists, the value of money, like the value of everything else is determined by the Theory of Value namely the value is determined by the demand for and supply of money. The demand for a country’s currency is derived from the demand for that country’s exports, while the supply of its currency is dependent on its demand for imports. Thus if the demand for a currency in the foreign exchange market is larger in relation to the supply ...
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