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in Open Economy Macroeconomics by (26.1k points)
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Differentiate between :

(i) Currency Devaluation and

(ii) Currency Depreciation

1 Answer

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Best answer

Devaluation means increase in exchange rate. Devaluation is said to occur when the exchange rate is increased by social action under a pegged exchange rate system. Devaluation is used as a tool to bridge the gap of trade deficit.
On the other hand, change in the price of foreign exchange under flexible exchange rate, when it becomes cheaper as compared to domestic currency is known as depreciation.

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