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(True or False) A weaker currency is bad for a country.

(True or False) A weaker currency is bad for a country.

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Answer #1

Correct Answer:

True

A weaker currency can help increase in exports, because goods become cheaper, but it has other negative effects such as high rise in inflation in the economy that will offset the gains from a weaker currency. Further, size of the trade deficit will hugely increase and it will hurt the economy. Value of debt and its interest payment will be more when currency value weakens. So, there is a one gain of increase in exports, but there are many other losses due to the weaker currency.

Though, currency making weaker intentional by the countries like China is good for the economy when it spreads exports and increase forex for the country.

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