Economics Exchange Rate Systems Questions
Exchange rates can have a significant impact on foreign aid. When a country's currency depreciates, meaning it becomes weaker compared to other currencies, the value of foreign aid received in that country increases. This can be beneficial for the recipient country as it allows them to receive more goods and services for the same amount of aid. On the other hand, if a country's currency appreciates, meaning it becomes stronger, the value of foreign aid decreases, potentially reducing the purchasing power of the aid received. Therefore, exchange rates can directly influence the effectiveness and impact of foreign aid on recipient countries.