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: -Depreciation lowers the foreign currency price of exports, and probably increases the quantity of exports and export revenue in domestic currency. Conditions may exist, however, where export revenue falls. Highly inelastic foreign import demand leads to falling export revenue.

Detailed explanation-3: -Orderly currency depreciation can increase a country’s export activity as its products and services become cheaper to buy. The Federal Reserve’s quantitative easing programs used to stimulate the economy in the aftermath of the 2007-2008 financial crisis caused U.S. dollar depreciation.

Detailed explanation-4: -When a country’s exchange rate increases relative to another country’s, the price of its goods and services increases. Imports become cheaper. Ultimately, this can decrease that country’s exports and increase imports.

Detailed explanation-5: -A depreciation of a currency generally causes a decrease in imports into that country, and an increase in exports from that country, thereby increasing Net Exports.