Suleman Ahmad Khan

SP18-BBA-156 ( BBA-5D)
When rupees depreciates/appreciates against most/all currencies what happened to balance
of trade deficit? Is it larger or smaller? What benefit Pakistan’s investors the most in any of
the above situation?
Balance of trade deficit is smaller when rupee depreciates against most currencies

Balance of trade deficit is larger when rupee appreciates against most currencies

Pakistan's investors will benefit more when rupee appreciates against most currencies

When rupee depreciates against most currencies;

Exports will become expensive while imports will become cheaper. The volume of exports will
increase while the volume of imports will decline. As a result balance of trade deficit will reduce
and balance of trade surplus will increase. Balance of trade deficit is smaller.
Pakistan's investors will lose since the cost of importing inputs will increase raising their cost of
production.

When rupee appreciates against most currencies;

Exports will become cheaper while imports will become expensive. The volume of exports will
decrease while the volume of imports will increase. As a result balance of trade deficit will
increase and balance of trade surplus will decrease. Balance of trade deficit is larger.
Pakistan's investors will benefit more since the cost of importing inputs will decrease lowering
their cost of production.