Examveda

Devaluation of currency leads to

A. fall in domestic prices

B. increase in domestic prices

C. no impact on domestic prices

D. erratic fluctuations in domestic prices

Answer: Option B

Solution (By Examveda Team)

Devaluation is the decision to reduce the value of a currency in a fixed exchange rate. A devaluation means that the value of the currency falls. Domestic residents will find imports and foreign travel more expensive. However domestic exports will benefit from their exports becoming cheaper.

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