devaluation

Vocabulary Word

Definition

Devaluation is when a government decreases the value of its currency in relation to other currencies. This can make a country's exports cheaper but makes imports more expensive.

Examples in Different Contexts

In economic software models, 'devaluation' might be a parameter adjusted to simulate economic scenarios. A data scientist might comment, 'Adjusting for devaluation, our model predicts a surge in foreign investments.'

Practice Scenarios

Economics

Scenario:

Our domestic production capabilities are being outpaced by imports, leaving us with a severe trade deficit. We need an aggressive strategy to rectify the problem.

Response:

Perhaps, a currency devaluation might give our domestic industries a competitive edge in the market.

Banking

Scenario:

The performance of our foreign investments has been stagnant over the past quarter. It might be time to reconsider our global strategy.

Response:

Agreed. With the recent currency devaluation, maybe it's time to increase our foreign investments.