ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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appreciation of the currency
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an increase in exports
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an increase in imports
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decrease in exports
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Detailed explanation-1: -Exports will increase and imports will decrease due to exports becoming cheaper and imports more expensive.
Detailed explanation-2: -Yes, devaluation helps in boosting exports because the goods become relatively cheaper for foreign consumers as the value of domestic currency goes down when compared to foreign currency. Devaluation helps in reducing the trade deficit.
Detailed explanation-3: -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-4: -If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value.