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"A depreciation makes imports more expensive and therefore leads to an increase in the value of...

"A depreciation makes imports more expensive and therefore leads to an increase in the value of imports."

Is this statement correct? Explain your answer.

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Answer #1

"A depreciation makes imports more expensive and therefore leads to an increase in the value of imports."

The depreciation or devaluation of X currency will make the imports from the foreign lands more expansive in terms of X (for example, a dollar's worth of US goods will cost more in terms of the X currency) when the X currency depreciate.

Therefore, the higher price of imports will lead the individuals and firms in the country to import less and produce the goods in their own country. As a result of this, the increase in export and a decrease in import the net aggregate demand for domestic products will increase.

Conclusion- The depreciation makes the import expansive and because of this the level of import in a country decreases. Decreasing the value of import. The above statemnt is incorrect.

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