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The Economics of Money, Banking and Financial Markets 4th Edition by Frederic Mishkin
Edition 4ISBN: 978-0133859997The Economics of Money, Banking and Financial Markets 4th Edition by Frederic Mishkin
Edition 4ISBN: 978-0133859997 Exercise 2
How does a decline in the value of the pound sterling affect British consumers?
Explanation
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Verified
If the value of currency is reduced in global market, then goods and services produced in country become comparatively cheaper.
Decline in the value of the pound sterling affect British consumers as follows:
If the value of the pound sterling is reduced, foreign goods will become more costly and therefore, British consumers will reduce the purchase of foreign commodities and increase the use of domestic goods.
If the value of pound sterling depreciates it means that exports from will become cheaper and imports to from the rest of the world will become costlier. As a result imports to from will become costlier. Hence, the British consumer who uses the imported goods will be definitely affected due to the depreciation of pound.
Conclusion:
The decrease in the value of currency decreases the import and increase the export of country. As a result of it there will be inflation in the economy which will affect the British consumer in general, irrespective of other uses of imported goods or domestic.
Decline in the value of the pound sterling affect British consumers as follows:
If the value of the pound sterling is reduced, foreign goods will become more costly and therefore, British consumers will reduce the purchase of foreign commodities and increase the use of domestic goods.
If the value of pound sterling depreciates it means that exports from will become cheaper and imports to from the rest of the world will become costlier. As a result imports to from will become costlier. Hence, the British consumer who uses the imported goods will be definitely affected due to the depreciation of pound.
Conclusion:
The decrease in the value of currency decreases the import and increase the export of country. As a result of it there will be inflation in the economy which will affect the British consumer in general, irrespective of other uses of imported goods or domestic.
The Economics of Money, Banking and Financial Markets 4th Edition by Frederic Mishkin
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