How does appreciation and depreciation of currency affect exports and imports?

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Solution

Appreciation of the currency implies that lesser rupees are required to buy a dollar, or that a dollar can now buy goods worth lesser rupees than before. Accordingly, exports are likely to take a hit. On the other hand, imports are likely to increase.

Depreciation of the currency implies that more rupees are required to buy a dollar, or that a dollar can now buy goods worth more rupees than before. Accordingly. exports are expected to increase, while imports will take a hit.

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Similar questions

(a) How does depreciation of domestic currency affect the exports?

(b) How does Make in India project affect foreign exchange rate?

In the event of depreciation of the country's currency, its exports tend to increase while imports tend to decrease.

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