Appreciation ,Depreciation Of Currency And Its Impacts-Explained -Basic Concepts Of Economy Part 3

What is Appreciation of Currency ?

Currency appreciation is an increase in the value one currency regarding another currency.

Let us see an example of currency appreciation.

At the month of January, Rupee value for 1 dollar is 55 rs.

At the month of February ,Rupee value of 1 dollar is 50 rs.

At the month of March,Rupee value of 1 dollar is 45 rs.

Here rupee value decreases for 1 dollar.But in economic sense,rupee value appreciates with respect to dollar.Currency appreciation is an increase in the value one currency regarding another currency.In real sense,you have to pay less to buy a dollar.This is what currency appreciation denotes.

Major Effects Of Appreciation :

Import:

Import become cheap as rupee appreciates as we have to pay less (at march =45 rs) than what they paid earlier.As more rupees left ,people tend to buy more imported goods.This  leads to more outflow of currency from the country .

Export:

Export will earn lower revenue as at march we will loss 5 rs when compared to February.ie when we sell things we get less rs compared to previous months due to appreciation.

Indians Who Wish To Abroad On Holidays :

For each dollar he intends to spend in abroad for spending ,the traveler has to spend 5 rs less (march) and his trip will become cheaper.

For example,a tourist person like to buy an apple cost 1 dollar: Now he need to give just 45 rs (at march) .If rupees again appreciates,he again need to give less rupees and thus trip will become cheaper.

What is Depreciation Of Currency ?

Currency depreciation  is a decrease  in the value one currency regarding another currency.

Let us see an example of currency appreciation.

At the month of January, Rupee value for 1 dollar is 55 rs.

At the month of February ,Rupee value of 1 dollar is 60 rs.

At the month of March,Rupee value of 1 dollar is 65 rs.

Here rupee value increases for 1 dollar.But in economic sense,rupee value depreciates with respect to dollar.Currency depreciation is an increase in the value one currency regarding another currency.In real sense,you have to pay more to buy a dollar.This is what currency depreciation denotes.

Major Effects Of depreciation:

Import:

Import become costlier as rupee depreciated  ie we have to pay more (at march =65 rs) than what they paid earlier.Due to this import will reduce and domestic goods consumption will increase.

Export:

Export will earn higher revenue  as at march we will gain 5 rs  when compared to February ie  when we sell things we get more  rs compared to previous months due to depreciation.Due to this ,Exports will increase.

Indians Who Wish To Abroad On Holidays :

For each dollar he intends to spend in abroad for spending ,the traveler has to spend 5 rs more (march) and his trip will become costlier.

 

 

 

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