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If a country devalues its currency, its
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- Exports become cheaper and imports become costlier
- Exports become costlier and imports become cheaper.
- Exports value is equivalent to imports value
- No effect on exports and imports
- Exports become cheaper and imports become costlier
Correct Option: A
Devaluation means official lowering of the value of a country’s currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency.Devaluation causes a country’s exports to become less expensive, making them more competitive in the global market. This, in turn, means that imports are more expensive, making domestic consumers less likely to purchase them.
