Relationship between Export and Imports with Exchange Rate
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The exchange rate has an effect on the trade surplus or deficit, which in turn affects the exchange rate, and so on. In general, however, a weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper
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a. A country's importing and exporting activity can influence its GDP, it's exchange rate and interests rates.
b. A rising level of imports and a growing trade dificit can have a negative effect on a country's exchange rate.
c. Higher inflation can also import exports by having a direct impact on input costs such as material and labour.
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