Detailed Answer
Answer (C) is correct. If the growth of a country’s national income is more rapid than other countries’ national income, its currency is likely to depreciate. A country’s imports vary directly with its level of income. As income rises in Esland, Esland consumers purchase more domestic and foreign goods. The greater demand for foreign goods causes a demand for the foreign currency. When demand increases for the foreign currency, its price increases, and Esland’s currency depreciates as a result.