A real depreciation of the domestic currency has which of the following consequences?

Question

Quizplus · Accepted Answer

A real depreciation of the domestic currency leads to higher domestic prices for imported goods, as it takes more units of the domestic currency to buy the same amount of foreign currency needed to purchase imported goods. This can cause inflationary pressures in the domestic economy. It does not necessarily lead to a decrease in the domestic cost of living or higher domestic unemployment, as these outcomes depend on various other factors in the economy.

A Real Depreciation of the Domestic Currency Has Which of the Following