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What are the impacts of currency, devaluation, and revaluation on international trade? devaluation is when the value of a currency pegged to a foreign currency under a fixed exchange rate is reduced.
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On the other hand, revaluation is the opposite.
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This is when the value is increased relative to another currency.
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So how does this affect international trade? so with devaluation, the country's currency is weaker.
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So therefore, the country's exports appear to be cheaper to other countries.
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So there's going to be an increase in domestic exports.
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Recall that the demand curve shows with a lower price, there's a greater quantity demanded.
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So this makes sense.
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This will result in an improvement in the balance of payments on the nation's current account.
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It's also going to lead to trade, surplus, and overall economic growth.
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So what about revaluation? so as you might expect, exports are going to be more expensive.
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So a country's exports are going to decrease.
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However, foreign goods are less expensive.
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So imports become cheaper.
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Imports will therefore increase.
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So while this may hurt a country's exports, a country will be able to purchase more imports.
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It says the negative effect in the balance of payments on the nation's current account...