Discuss the effects of depreciation of domestic currency on export and imports.
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Depreciation of domestic currency has a favourable effect on the exports of the country, which now become cheaper, so they will be more in demand. This brings about export promotion in the economy. On the other hand, depreciation has a unfavourable impact on the imports of the country, as they become costlier. So, their consumption will get restricted, i.e., their demand shall fall. This leads to import restriction.
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