Question

Joseph is a citizen of Jamaica who is always reading and watching the news on the performance of the economy. He has noticed that under successive governments the Jamaican dollars has been depreciating over the last few years and he is of the view that this has impacted the economy negatively. He believes the government should always have a policy objective that ensures that the currency is always appreciating against other currencies. He is always saying “It is always good to have a strong currency” Do you agree with Joseph Explain your answer.

Answer 1

It can be mentioned that I don't agree with the statement because depreciating currency is not always bad and consider a situation where a currency always appreciates then what happens is that the domestic goods will be very expensive in the foreign countries because the currency is appreciating where you get less amount of the currency per unit of foreign currency with which people tend to buy us of your domestic products as a result of which the exports decrease and in another way the foreign goodswill become cheaper in your country as a result of which people buy more foreign holds because you get more amount of foreign currency with the currency appreciation in your domestic arena as a result of which the imports increase and with exports decreasing and imports increasing the trade balance will be affected where the net exports will become negative with which the country will godown economically on the whole and that is the reason why you should consider the depreciation of currency at times as well