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An economy with higher interest rates provides lenders with a larger return compared to other nations. As a result, higher interest rates draw in foreign investment and drive up the value of the currency.
A weaker currency drives up the cost of imported goods and may directly affect the cost of numerous items in stores. This cost-push inflation seems to have the effect of reducing the internet companies of a dropping pound and can be seen by inwards and movement of relatively brief aggregate supply.
Changes between the demand for exports as well as imports are the primary way that the exchange rate has an influence on the real economy. A genuine devaluation of the home currency increases demand for items made domestically by making exports more competitive overseas and importing less competitive domestically.
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