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Question
Explain the impact of home currency depreciation on the exports of a nation.
Solution
Impact of home currency depreciation on the exports of a nation:
Domestic currency depreciation refers to a decrease in the value of the domestic currency in relation to foreign currency as a result of market forces.
For e.g., 1 US dollar = ₹ 80 (before )
1 US dollar = ₹ 82 (after depreciation)
Because of the devaluation of the native currency, the purchasing power of the dollar has increased while the purchasing power of the rupee has dropped. Because Indian items are now cheaper in the US, one US dollar can now buy more goods and services. It will result in a rise in Indian exports.
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