Civil Services Examination · प्रश्न 8

Consider the following statements: The effect of devaluation of a currency is that it necessarily 1. improves the competitiveness of the domestic exports in the foreign markets 2. increases the foreign value of domestic currency 3. improves the trade balance Which of the statements given above is/are correct?

1 only
1 and 2
3 only
2 and 3

उत्तर देखें और व्याख्या

उत्तर: (A) 1 only

व्याख्या

Devaluation makes exports cheaper abroad, but it lowers the external value of the currency. It does not necessarily improve the trade balance (J-curve, inelastic demand).