Exchange Rate Depreciation
Currency depreciation occurs when a currency's value decreases relative to other currencies. The pound depreciates if it buys fewer euros (e.g., £1 buys €1.00 instead of €1.10).
Real World
The pound's 15% depreciation after the Brexit vote in 2016 boosted Airbus's UK manufacturing competitiveness (exports priced in dollars became cheaper) but raised the cost of imported components and fuel for British airlines like easyJet.
Exam Focus
Always consider both the benefit to exporters and the cost-push inflation from more expensive imports — one-sided answers cap at mid-level marks.
How well did you know this?