Question

What impact does the value of a country's currency have on pricing?

Answer 1

Changes in the value of currency can bring changes in the value price level in the nation. For example, a deliberate appreciation of currency reduces the amount of exports while increasing the volume of imports. This trade deficit reduces AD and so the reduction in AD brings the price level down. Similarly, a depreciation of the currency is expected to increase trade surplus and therefore shifts the AD outwards. This will increase the price level in nation.