Which of the following groups will gain from depreciation of the domestic currency?

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Question restatement: Which of the following groups will gain from depreciation of the domestic currency?

Option provided: a. tourists visiting from other countries

Analysis of the option and related concepts:
- Understanding depreciation: When the domestic currency depreciates, its value falls relative to foreign currencies. This makes foreign goods and services more expensive for residents, while making the country’s goods and services cheaper for foreigners. In the context of travel, this also means that travelers from other countries can exchange their currency for more units of the domestic currency, effectively lowering their travel costs in domestic terms.
- Implication for foreign tourists: Foreign tourists (tourists visiting from other countries) typically benefit from a weaker domestic currency because their own currency has more purchasing power inside the country they are visiting. This reduces the cost of accommodation, activities, and other spending while traveling, encouraging tourism from abroad.
- Potential counterpoints: If the question were about residents or import-oriented groups, the effects would differ. Local consumers often face higher prices for imported goods, and exporters might benefit from a depreciation due to more competitive pricing abroad. However, these considerations do not apply to foreign tourists.

Why this option is plausible: The statement aligns with the standard macroeconomic effect of currency depreciation on international visitors from other countries, who experience lower real costs when traveling in the depreciating country.

Why other options (if any) would be incorrect: Since the only option presented is about foreign tourists, we cannot evaluate other groups here. In a complete set, groups like domestic residents buying imported goods or local exporters could be affected differently, but those are not listed in the provided content.

Summary: The reasoning supports that foreign tourists are a group that would gain from depreciation of the domestic currency because their purchasing power increases when spending in the depreciating country, making travel and activities cheaper for them relative to staying at home or using their own currency elsewhere.

NFLS2024ECON11 Textbook HW 7. International Trade and Foreign Exchange Markets - Modules 6.1-6.6

Which of the following groups will gain from depreciation of the domestic currency?

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