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Consequences of a Depreciating Foreign Exchange Rate

Question

Analyse the consequences of a depreciating foreign exchange rate.

Category:

International Trade and Exchange Rates

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Preview Answer

I. 🍃Introduction
- Brief explanation of the topic
- Thesis statement

II. Effects of Decreasing Export Prices
- Increase in quantity of exports demanded
- Increase in value of exports
- Increase in net exports

III. Effects of Increasing Import Prices
- Decrease in quantity demanded for imports
- Decrease in value of imports

IV. Impact on Current Account Deficit/Surplus
- Decrease in current account deficit
- Increase in current account surplus

V. Effects on Aggregate Demand and Inflation
- Increase in total aggregate demand
- Increase in inflation

VI. Effects on Production Costs and Price Level
- Increase in price of imported raw materials/semi-finished goods
- Increase in cost of production
- Increase in price level/inflation

VII. Impact on Overseas Savers
- Discouragement of overseas savers who fear losing money

VIII. 👉Conclusion
- Summary of the main points
- Restatement of thesis
- Final thoughts and recommendations.

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