If a country experiences deflation, its currency will increase in value relative to its trading partners, ceteris paribus.

Question

Quizplus · Accepted Answer

Deflation typically indicates that the value of a currency is increasing, allowing consumers to buy more goods for the same amount of money. This increase in purchasing power relative to other currencies can make the currency more valuable on the international exchange markets, assuming all other factors remain constant (ceteris paribus).

If a Country Experiences Deflation, Its Currency Will Increase in Value