Question

Difference between devaluation and depreciation of money

Answer 1

Hey Mate!

ANS:

Both these terms look same but the meaning of both differs somewhat. Both these words are used in a foreign exchange market and both are affected by the international economy elements. Both these words are used when the value of the currency falls as compared to the other currency. Both have different causes and long term effects on the economy.

The meaning of Devaluation:

• Devaluation of currency occurs when in the country the monetary policy authority or government intentionally reduces the value of its currency by lowering the exchange rate as compared to another country's exchange rate.
• The authority devalues the currency by lowering the fixed exchange rate in the international market.
• It is changed by only the country's authority by comparing the worth of the goods and services in the international market.

Effects:

• Exports cheaper.
• Imports more expensive.
• Increased aggregate demand

The meaning of Depreciation:

• The depreciation of currency occurs by forces of demand and supply in the global market not by the government. (If under any circumstances the government sells a lot of currency more than needed in that case depreciation occurs.)
• By depreciating the value of currency the problem occurs only for short time but in a long time, it will help an economy to build well and reliable.
• It also guards against the market crack-ups.

Effects:

• Exports cheaper
• Imports expensive
• Higher inflation

HOPE MY ANSWER HELPS U ❤.

sorry for a long answer but it will help u..to understand