Economics Exchange Rates Questions
Exchange rate changes can have a significant impact on import and export competitiveness. When a country's currency depreciates, meaning it becomes weaker compared to other currencies, it makes the country's exports more competitive in international markets. This is because the lower exchange rate makes the country's goods and services relatively cheaper for foreign buyers, leading to an increase in export competitiveness.
On the other hand, when a country's currency appreciates, meaning it becomes stronger compared to other currencies, it makes the country's imports more competitive. This is because the higher exchange rate makes foreign goods and services relatively cheaper for domestic consumers, leading to an increase in import competitiveness.
Overall, exchange rate changes can affect the relative prices of goods and services in international trade, influencing the competitiveness of both imports and exports.