Question

What is appreciation and depreciation of a currency? Explain how some countries take advantage of currency depreciation to boost exports.

Answer 1

Appreciation means increase in the value of currency with other international currency where as depreciation refers to decrease in the value of currency compared to other international currency. Currency appreciation and depreciation takes place depending on the demand and supply of currency in international markets.

When the currency of any currency is depreciated than the exports of country will be cheaper to foriegn countries thus leading to increase in exports to other countries. When currency is deprecated than imports will be costlier which lead to decrease in imports. Thus when exports increase and imports decrease than the total net exports will increase. Exports increase will lead the market to boost production of goods and services thus leading to increase in Employment rate. All these lead to increase in economic growth.

answered by: anonymous