If a country wishes to depreciate their own currency, how could they do so in terms of monetary policy? List three possible effects depreciating their currency will have on the economy.

This is a question relating to international economics. In order to depreciate the currency, the country would have to use an expansionary monetary policy, as this would increase the supply of their own currency and so the price of it would decrease. As for fiscal policy,

By depreciating their currency, there will be several effects on the economy. Some of these effects include:

- Domestic goods will become cheaper abroad, so exports increase (This is because the goods that are produced will be cheaper in terms of foreign currency because the currency is weaker and so foreigners find their goods cheaper and will buy more of them)

• Foreign goods will become more expensive compared to domestically produced goods, so imports decrease (This is because the imports are bought in foreign currency, and the foreign currency is now more expensive because foreign currency is stronger due to the depreciation.)

- Because of the increase in exports and decrease in imports, the country will likely experience and increase in aggregate demand (This is because aggregate demand can be expressed as AD = C + G + I + (X-M), so when X (exports) increase, and M (imports) decrease, the overall aggregate demand of the economy will increase)