WBCS.LIVE practice question

What is the term for a country's deliberate downward adjustment of the value of its currency relative to a foreign currency?

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

Answer options

  1. Depreciation
  2. Demonetization
  3. Devaluation
  4. Deflation

Correct answer and explanation

Correct answer: Devaluation

Explanation: āœ… Correct Answer: C) Devaluation šŸ“š Explanation: Devaluation is an intentional, macroeconomic monetary policy tool used by a country with a fixed exchange rate to aggressively lower the official value of its currency relative to a foreign reference currency (like the US Dollar). It is usually done to make domestic exports significantly cheaper in the global market and reduce massive trade deficits.