What are the effects of devaluation of currency on trade?
Why does it make imports costly and hence stimulates demand at home?
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This entry was posted on Monday, June 7th, 2010 at 3:23 am and is filed under Currency Trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
June 7th, 2010 at 3:23 am
Devaluation means your money is worth less compared to the other currency. Suppose you used to have to pay $1.00 for a hamburger from Canada or from the U.S. We devalue by 50%, now you have to pay 1.50 for a hamburger from Canada. At the same time, the price of American hamburgers are the same, so you can still buy a hamburger for $1.00. So you can buy more goods in at home for your dollar than from other countries.