ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -However, both devaluation and depreciation lead to a fall in the value of the domestic currency in relation to the foreign currency. Consequently, domestic goods become cheaper in terms of foreign currency. Accordingly, exports tend to rise (while imports are discouraged).

Detailed explanation-2: -Depreciation of the currency implies that more rupees are required to buy a dollar, or that a dollar can now buy goods worth more rupees than before. Accordingly. exports are expected to increase, while imports will take a hit.

Detailed explanation-3: -Devaluation is the fall in the value of domestic currency in relation to foreign currency. It is planned by the Central Bank in situation, when exchange rate is not determined by the forces of demand and supply.

Detailed explanation-4: -What Is Currency Depreciation? Currency depreciation is a fall in the value of a currency in terms of its exchange rate versus other currencies. Currency depreciation can occur due to factors such as economic fundamentals, interest rate differentials, political instability, or risk aversion among investors.

Detailed explanation-5: -True. Because due to depreciation, value of domestic currency decreases in relation to the foreign currency. Accordingly, goods become cheaper in the domestic economy which encourages exports, and goods costlier in the foreign market which discourages imports.