Hello aspirant,
Devaluation is the decrease in the value of a currency in terms of gold, silver, or other currencies. To close ongoing balance-of-payments deficits, devaluation is used. For instance, a currency devaluation will result in lower pricing for exports from the home nation that are paid for using the currency of the importer. Devaluation raises the cost of imports that are bought in the home country while simultaneously making exported goods more affordable for other nations. The country’s export revenue will increase and its import spending will decrease if demand for both exports and imports is extremely elastic (that is, the amount purchased is strongly responsive to changes in price).
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Question : When domestic currency gains value in relation to a foreign currency in the international market, it is termed as a situation of:
Option 1: Currency Depreciation
Option 2: Currency Appreciation
Option 3: Currency Devaluation
Option 4: None
Question : Assertion: Devaluation of Domestic currency refers to rise in National Income of domestic country.
Reason: Devaluation of Domestic currency refers to reduction in the value of domestic currency with respect to foreign currency, under fixed exchange rate system.
Option 1:
Both Assertion and Reason are true and correct explanation
Option 2: Both Assertion and Reason are true and incorrect explanation
Option 3: Assertion is true but Reason is false
Option 4: Assertion is false but Reason is true
Question : What is the primary objective of a country when it undertakes currency devaluation?
Option 1: To increase the value of its currency
Option 2: To stabilize the exchange rate
Option 3: To reduce the value of its currency
Option 4: To achieve currency convertibility
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