Differentiate between Currency Depreciation and Currency Apprecia… - Vidyadip

Question

Differentiate between Currency Depreciation and Currency Appreciation.

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Answer

S.No.	Basis	Currency Depreciation	Currency Appreciation
1.	Meaning	It refers to decrease in the value of domestic currency in terms of foreign currency.	It refers to increase in the value of domestic currency in terms of foreign currency.
2.	Effect on Imports/ Exports	It makes domestic goods cheaper in foreign country as more of such goods can now be purchased with the same amount of foreign currency. So, it leads to increase in exports.	It makes foreign goods cheaper in domestic country as more of such goods can now be purchased with the same amount of domestic currency. So, it leads to increase in imports.
3.	Example:	A change from $ 1 = ₹ 50 to $ 1 = ₹ 55 represents that Indian Rupees is depreciating.	A change from $ 1 = ₹ 50 to $ 1 = ₹ 45 represents that Indian Rupee is appreciating.

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