MANAGEMENT

Detailed explanation-1: -Devaluation is reduction in value of domestic currency by the government under fixed exchange rate system.It is a deliberate effort. On the other hand, Depreciation is decrease in value of domestic currency due to market forces of demand and supply under flexible exchange rate system.

Detailed explanation-2: -One such measure is devaluation. It means the value of one currency is reduced against another. We mustn’t confuse it with depreciation, even though both mean one currency loses value against another.

Detailed explanation-3: -The top 3 causes/reasons for currency devaluation are boosting exports and encouraging imports, narrowing the trade deficit, and reducing the sovereign debt burden. Primarily, currency devaluation is used as a monetary policy tool to boost trade.

Detailed explanation-4: -When a floating currency loses value compared to another currency, that’s called a depreciation (not to be confused with the accounting term). If its value increases, that’s called appreciation.

Detailed explanation-5: -Devaluation, the deliberate downward adjustment in the official exchange rate, reduces the currency’s value; in contrast, a revaluation is an upward change in the currency’s value. A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies.