Depreciation refers to a decrease in the value of a country's currency relative to other currencies. This means that one unit of the currency can buy fewer units of another currency.
Picture your smartphone losing its value over time due to wear and tear. Similarly, when a country's currency depreciates, it loses purchasing power compared to other currencies, making imported goods more expensive.
Trade Deficit: When a country imports more than it exports, which can lead to depreciation.
Current Account: Part of the balance of payments that records transactions related to trade in goods and services.
Capital Outflows: The movement of money out of a country by foreign investors, which can cause depreciation.
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