Devaluation is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged.
In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, depreciation is used for the unofficial decrease in the exchange rate in a floating exchange rate system. The opposite of devaluation is called revaluation.
Depreciation and devaluation are sometimes incorrectly used interchangeably, but they always refer to values in terms of other currencies. Inflation, on the other hand, refers to the value of the currency in goods and services (related to its purchasing power). Altering the face value of a currency without reducing its exchange rate is a redenomination, not a devaluation or revaluation.
Most of the world measures their value of currency according to euros & dollars. That is the reason why we are losing the value of our currency as well. According to Islam we have been recommended to use the gold & silver coins as medium of exchange. Because whenever there is inflation then the money loses its value and purchasing power is also reduced, if we use gold, silver & copper coins as currency or medium of exchange then their value will remain constant every now and then.
Example: If we save PRs. 5000 in our savings then after ten years or so we cannot purchase same items and number of items as we were supposed to purchase items ten years before. The value would become decrease after some time.
No comments:
Post a Comment