WBCS.LIVE practice question

Devaluation of currency will be more beneficial if

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. prices of domestic goods remain constant
  2. prices of exports remain constant
  3. prices of imports remain constant
  4. prices of exports rise proportionately

Correct answer and explanation

Correct answer: prices of exports remain constant

Explanation: āœ… Correct Answer: B) prices of exports remain constant šŸ“š Explanation: 'Devaluation' makes a country's currency cheaper relative to foreign currencies, which theoretically makes its exports more attractive. However, this is only 'beneficial' if the 'prices of exports' in terms of the domestic currency 'remain constant'. If export prices rise significantly, the competitive advantage gained from devaluation is lost.