Question

What is a country's exchange rate? What does export price and import price mean?
How does it lead to a decrease in export price and an increase in import price?
Syllabus ( IGCSE )

Answer 1

Answer:

A depreciation of the exchange rate increases the price of imports and reduces the foreign price of a country's exports. If consumers buy fewer imports, while exports grow, AD in will rise – and there may be a multiplier effect on the level of demand and output.