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Currency Depreciation |
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Currency depreciation A decline in the value of one currency relative to another currency. Depreciation occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency. Currency Depreciation A decrease in the value of a currency with respect to other currencies. This means that the depreciated currency is worth fewer units of some other currency. While depreciation means a reduction in value, it can be advantageous as it makes exports in the depreciated currency less expensive. For example, suppose one unit of Currency A is worth one unit of Currency B. If Currency A depreciates such that it becomes worth half of one unite of Currency B, then exports denominated in Currency A are only half as expensive when trading in a Currency B market. See also: Floating currency. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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For an illustration of the effects of currency depreciation on a nominal index, see the later discussion of the evolution of the staff's broad nominal dollar index over the past twenty-five years. There was an increase in Brazil's output despite a possible decline in domestic consumption as exports, helped by the currency depreciation, rose sharply. dollar terms recently as a result of currency depreciation. |
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