Question

What is meant by a currency war? Explain. What are it’s objectives? What are the macroeconomic consequences of a currency war? Explain clearly precisely

Answer 1

The currency war is a kind of devaluation war in which the countries make the value of the currency of their country to fall in comparison to the other countries to gain the trade advantage over the other countries .

As a result of the currency war the price of the exports increase and also the imports become become more costlier.

The objective behind the currency war is the expansion of the trade of the country with the rest of the world in comparison to the other countries.Because the exports increase hence the income of the country also increase. As the exports increase people get more employment and the level of employment increases.

The macro effect of the currency war does not come in favor of the country. The aggregate savings of the people of he country reduce because the imports become costlier and as a result the consumers have to pay more price to buy the imported product. It discourages the savings among the people because they are left with lesser money in their pockets.