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Question:

Differentiate between devaluation and depreciation.

Answer:

Devaluation Depreciation
It occurs when the currency exchange rate is officially lowered under a fixed exchange rate system. When the value of currency falls as compared to other currencies, it is known as depreciation.
It exists under a fixed exchange rate. It exists under a flexible exchange rate.
It is due to the government's decision. It is due to the demand and supply forces.


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