<p>Does inflation mean depreciation of money value? In inflation, the price rises, but the GDP increases too. Therefore, in inflation, can we determine depreciation?</p>
<p>Inflation means the monetary supply is being increased. Increasing the money supply decreasing interest rates. As interest rates are decreased, it is more advantageous to invest your money in countries with higher interest rates. Thus the money is moved to these other countries and the currency depreciates.</p>
<p>Once again, Inflation hints at a lower rates, leading to overseas investment and depreciation.</p>
<p>The GDP increase has nothing to with this because is it is only increasing Nominal and not in terms of Real Variables.</p>
<p>Or-- inflation in a country means it costs more for the same thing. Therefore people in foreign countries don’t want to buy that thing, so there is less demand for the currency. Less exports, currency depreciates.</p>
<p>Example-- inflation in Japan. Costs more yen for the same bicycle, 200000 yen instead of 100000 yen. Now US consumers are less willing to pay $1000 for 100000 yen, because now their $1000 will buy only half a bicycle, not an entire bicycle. So yen depreciates versus dollar, and US consumers buy bicycles made in Singapore instead. (All numbers completely made up.)</p>