ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -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.

Detailed explanation-3: -By devaluing its currency against another, it can increase exports because its goods and services will cost less in the international market.

Detailed explanation-4: -Economic effects Thus, depreciation of a currency tends to increase a country’s balance of trade (exports minus imports) by improving the competitiveness of domestic goods in foreign markets while making foreign goods less competitive in the domestic market by becoming more expensive.

Detailed explanation-5: -Devaluing Currency A weak domestic currency makes a nation’s exports more competitive in global markets, and simultaneously makes imports more expensive. Higher export volumes spur economic growth, while pricey imports also have a similar effect because consumers opt for local alternatives to imported products.