Economics Exchange Rates Questions
Exchange rates have a significant impact on import and export prices. When a country's currency depreciates or weakens against another currency, it makes imports more expensive and exports cheaper. This is because a weaker currency means that more of the domestic currency is required to purchase the same amount of foreign currency. As a result, the prices of imported goods and services increase, making them less affordable for consumers. On the other hand, a weaker currency makes exports more competitive in international markets as they become relatively cheaper for foreign buyers. This can lead to an increase in export volumes and potentially boost a country's economy. Conversely, when a country's currency appreciates or strengthens, imports become cheaper and exports become more expensive.