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 above statements is/are correct?
Question:
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 above statements is/are correct?
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 above statements is/are correct?
Options
Answer: 1 only
Explanation:
Devaluation makes exports cheaper and imports costlier, improving export competitiveness. It does not increase foreign value of domestic currency, and its impact on trade balance depends on elasticity of demand.
Explanation:
Devaluation makes exports cheaper and imports costlier, improving export competitiveness. It does not increase foreign value of domestic currency, and its impact on trade balance depends on elasticity of demand.
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