Analyse how a fall in the value of a currency may increase a current account surplus on the balance of payments.

A fall in the value of a country’s currency means that more must be sold in order to buy one unit of another currency. This has implications on the domestic country’s trading, with export prices falling and import prices rising. As export prices fall, demand for this country’s goods will increase, leading to a rise in export revenue if demand for their goods is price elastic and thus significantly impacted by this fall in price. Similarly, a rise in import prices will lead to a fall in demand for imported goods, and thus will lower overall expenditure on imports - considering imports are price elastic.
Taking into account both a rise in export revenue and fall in import expenditure, the domestic economy will experience a surplus on their trade balance as more money is entering the country than leaving it. A country’s trade balance is one component of their current account - with credit items increasing and debit items falling, this may ultimately lead to a surplus on their balance of payments.