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Finance: What is Devaluation?
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Finance: What is Devaluation? 1 Views


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Description:

What is Devaluation? The process by which a nation deliberately lowers the value of its currency relative to other international currencies is called devaluation. In international trade, a devalued currency makes exports cheaper and imports more costly, which can help to stimulate more domestic manufacturing business in emerging market countries.

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Transcript

00:00

Finance allah shmoop What is devaluation steve Valuing a currency

00:08

i am making it less valuable can only happen when

00:12

the government which controls that currency decides to devalue it

00:17

So yeah it's a kind of their call when and

00:19

how much basically devaluation happens when a country decreases the

00:24

value of its currency against other currencies A lot of

00:27

times by just running the printing press all night printing

00:30

a whole bunch of their currency there's a whole lot

00:32

of supply on the market Well why on earth would

00:35

a country ever intentionally do this like devalue their currency

00:39

Well usually because it wants its goods to be less

00:43

expensive abroad like to be ableto export them more cheaply

00:47

to places like the u s and china and russia

00:50

by a lot of whatever's Well when a currency is

00:53

devalued the homegoods iii the home country goods are cheaper

00:57

in other markets This will usually lead to an overall

01:01

increase in exports for that country when it comes to

01:04

exports and imports though there's a kind of a union

01:06

ng ng anyway there's a counterbalance at play here imports

01:10

become mohr expensive and consumers at home likely shift away

01:15

From foreign teo purchase in country goods right it's kind

01:18

of protecting the country's own domestic product there Currency changes

01:22

Yeah well the result Yeah strengthened domestic product sales in

01:26

all of this might sound hunky dorey But while there

01:29

are some potentially nasty side effects local companies are getting

01:33

a bit of a break here which might make them

01:35

inefficient Slash lazy slash sloppy slash lacking in competitive spirit

01:40

to go fight it out in the global markets No

01:43

plus one of currency is devalued Each unit is worth

01:45

bless and that can lead to inflation which causes all

01:48

kinds Other problems down the line So that's just the

01:51

nutshell of devaluation making money not worthless But you know 00:01:57.019 --> [endTime] worth less

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