Does a Currency Depreciation Cause a Worsening of a Countrys Balance of Trade?
(Continued from Page 2)At a certain period, the effects of a devaluation of Exchange Rate may be eroded away if increased import prices and cheaper cause demand for local goods (expenditure switching) and demand for to rise. Increased export earnings will serve as an injection into the domestic circular flow of income. Through the multiplier, it generates more income. Consumption and savings will increase, interest rates will fall. Investments will increase (due to the devaluation), giving the economy a push. Employment of resources will increase (shifting the PPF to a point on the curve or nearer to it) and the country enjoys a higher
