What does it mean to say that a currency appreciates Depreci

What does it mean to say that a currency appreciates? Depreciates? 3 (12pt) T T T Arial Words:0 Path: p QUESTI 10 points Save Answer Why might trade restrictions be a poor way of protecting domestic jobs? 3 (12pt) T TT Arial Words:0 Path: p

Solution

1. When a currency appreciates it means that it can buy more of foreign currency with a unit of home currency.
For e.g. if 1 USD trades for INR 60 on Jan 20 and then changes to INR 62 on Jan 21, then it means that USD has appreciated as it can buy more INR with the 1 USD.

2. Trade restrictions often increase the deadweight loss of production as there is unclaimed surplus which doesn\'t go to anyone. This is true of the import tariffs and even import quotas. They also reduce the consumer surplus as price increases and also doesn\'t improve competitiveness of the domestic producers