Question : Which of the following factors can contribute to the depreciation of a country's currency?
Option 1: Low interest rates.
Option 2: Weak economic performance.
Option 3: Political instability.
Option 4: All of the above.
Correct Answer: All of the above.
Solution : The correct answer is d) All of the above.
All of the factors mentioned in options (a), (b), and (c) can contribute to the depreciation of a country's currency:
a) Low interest rates: When a country's interest rates are low, it can reduce the attractiveness of holding investments in that country's currency. This can lead to a decrease in demand for the currency, causing its value to depreciate.
b) Weak economic performance: If a country's economy is experiencing sluggish growth, high unemployment, or other indicators of weak performance, it can reduce investor confidence and lead to a depreciation of the currency.
c) Political instability: Political instability, such as social unrest, government instability, or policy uncertainty, can undermine investor confidence and lead to a depreciation of the currency.
