Distinguish between depreciation and devaluation. – InterviewSolution

InterviewSolution

1.

Distinguish between depreciation and devaluation.

Answer»

The difference between depreciation and devaluation is as follows:

Depreciation	Devaluation
1. Depreciation of currency occurs when the value of currency reduces in terms of another currency due to the market forces of demand and supply in the global market.	1. Devaluation of currency occurs when the government of a country reduces the value of its currency in terms of another currency by increasing the supply of domestic currency in the global market.
2. Depreciation of currency happens under the floating exchange rate system.	2. Devaluation of currency happens under the fixed exchange rate system.

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