Question:

"Depreciation of currency may promote exports of a nation."
Defend or refute the given statement with valid arguments.

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Currency depreciation can benefit exports but may lead to higher import costs and inflation.
Updated On: Jan 30, 2025
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Solution and Explanation

Depreciation of a currency reduces the price of exports in foreign currency terms, making them more competitive in the global market. This increases the demand for exports, boosting a nation’s trade balance. However, it may also increase the cost of imports, leading to inflationary pressures within the domestic economy. Example: If the Indian rupee depreciates against the US dollar, Indian goods become cheaper for US buyers, increasing export demand.
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