IGCSE/GCSE/O & A Level/IB/University Student Forum

Qualification => Subject Doubts => GCE AS & A2 Level => Commerce => Topic started by: highly_ambitious on June 03, 2010, 02:03:20 pm

Title: Economics huge doubt!!
Post by: highly_ambitious on June 03, 2010, 02:03:20 pm

When a country's currency depreciates then why does the import prices into the country rises and export prices become low???

Title: Re: Economics huge doubt!!
Post by: Alpha on June 03, 2010, 02:57:33 pm

Depreciates means the country can now afford less goods and services on the international market.

Understand this well:

If a country's currency depreciates, the country's money is worth relatively less. You need more of the country's currency to exchange with foreign money.

That means other countries are better off when compared with the country in question.

Import prices are foreign prices, you are buying from other countries. If your money has lost value, you will need to pay more for the goods. Your purchasing power has decreased, meaning that of foreigners have increased. They can buy more of your goods and services with the same money as they were using before. That's why export prices fall, because their purchasing power increases.

If it's still confusing, lemme know...

Title: Re: Economics huge doubt!!
Post by: highly_ambitious on June 03, 2010, 06:37:59 pm

Thanks a loads.!! gr8 help!!..u've actually helped to the whole bop topic!!..

Thanks again.

Title: Re: Economics huge doubt!!
Post by: Alpha on June 04, 2010, 01:08:01 am

Ah good to know. Welcome.  :)

Title: Re: Economics huge doubt!!
Post by: Meticulous on June 04, 2010, 02:22:05 am

Thanks Alpha

+rep.