Is Inflation and depreciation of currency related?

Question

Is inflation and appreciation/depreciation of the currency value in a country related? could any one explain in detail.

Thank you

bharath

Answer 1

prices are going up all the time and never come down. its like we're becoming a police state

Answer 2

Inflation means that prices rise. Which means that your money buys less. Which means that the value of your money has decreased. Hence depreciation of your currency.

Answer 3

When life was simpler the exchange rate was affected by the differences in inflation rates between countries.

Now like oil its all bout the futures market and wheeling and dealing including price rigging and all the other financial nasties with prices rigged to maximise dealer bonuses.

Currency is just another commodity

Answer 4

Good question.

In a way yes - this is more prominent when it comes to Rupee vs US $.

One of the main components of taday's inflation is the crude and crude is always quoted in US $ - very close to $140 as it stands today. Assuming inflation (which as everyone says is the spending requirement) is at 11.05% today, if the Rupee appreciates from 42 Rs a USD to let us say 40 a USD, the crude price remaining the same at $140, we pay only 140 * 40 in stead of 140 * 42 that we used to pay thereby containing inflation in this segment. Some of the commodities are also in the same style.

Answer 5

Well, I'm not very good at economics, but I believe that if one thing falls everything else does. So maybe the inflation and depreciation of currency may be related (well, probably just in the U.S.).

Answer 6

Yes, Inflation or Deflation directly affects to the money market as well the total Economy. Inflation causes surplus money circulation in the market and thus the people have more purchasing power and the money use it as they wish or depends on the demanded market. A demanded market will always tent to be a price hike and a responsive buyers/users. Such market situation looses currency value in the short run.

All opposite situation causes in the case of deflation.

Deflation and depreciation is no manner related.

There are certain measures to control both the situation by the  Fiscal measures and monetary measures, this otherwise called price mechanism.

This a very wast and detailed subject where economists are always look into.