What kind of exchange rates may destabilize the domestic economy because wider fluctuations stimulate and then depress industries producing exported goods?

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catheline7320 catheline7320

22-08-2022
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What kind of exchange rates may destabilize the domestic economy because wider fluctuations stimulate and then depress industries producing exported goods?

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smecloudbird18 smecloudbird18 · Answer 1 · 2022-08-25T18:15:39+02:00

Even the domestic items that rely on imported components and raw materials will see cost changes when exchange rate fluctuate. Exchange rates can also have an impact on the employment market and real estate market in addition to having an impact on inflation, the interest rates, and investment performance.

In general, a weaker currency raises the cost of imports while lowering the cost of exports for the buyers abroad, which encourages exports. A country's long-term trade surplus or deficit can be impacted by a country's currency, which might be weak or strong. When a country has a floating exchange rate.

To learn more about exchange rate, click here.

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