In August of 2018, the Turkish Lira depreciated sharply against the US dollar. The underlying causes behind the depreciation of the Lira are:

• the exceptionally large external financing need (to buy goods from abroad and to pay foreign-denominated debt)
• a slowing global economy
• rising US interest rates
• high inflation

a. Explain how each of these four factors caused the Lira to depreciate against the US$. (total value / bullet = 1 point. Subtotal = 4 points)

How would the depreciation of the Lira affect the following? (total value / bullet = 1 point. total = 3 points)

• International trade
• Inflation in Turkey
• Foreign Investments into Turkey and Multinational Profits in Turkey