Answer to Question #16230 in Economics of Enterprise for babu

Question

Is a depreciation in a country’s exchange rare necessarily a bad thing? Explain

Answer 1

Sharp fluctuations in the exchange rate strengthen international economic instability, including monetary and financial relations with negative socioeconomic consequences, losses and gains of some other countries.
In particular, the depreciation of the national currency allows the country's exporters to lower their prices in foreign currency, received the award at the appreciated exchange proceeds of foreign currency in the national cheapened, and sell products at prices below the world average, which leads to their enrichment at the expense of their material losses country. But at the same time the depreciation of the national currency increases the cost of imports, as for the same amount in your own currency foreign exporters have to raise prices, which stimulates growth in the country, reducing the import of goods and consumption, or the development of national production of goods instead of imported ones.