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Effect on Relative prices, I understand that when Home Currency 'depreciates' , Price of Import increases (i.e. cost of good imported in terms of rupee), and Price of Export decreases. Here does "Price of Export" mean, people export less because foreigners don't want to buy in our country as rupee depreciated i.e. they have to pay more in terms of rupee. Am I right...?
Answers (4)
Yoga Vishnu
When home currency depreciates, it makes the exports cheaper and creates more demand for the exports.
So, for those who want to buy from us its cheap, as their currency (foreign currency) appreciated and our home currency depreciated. Thus more demand.