When policy makers decide to devalue the currency, such an action generally represents:
A) a decrease in the pegged value of the domestic currency.
B) a decision to let the currency float.
C) a decrease in the foreign price level.
D) a decrease in the domestic price level.
E) a decrease in the pegged value of the foreign currency.

Question

Quizplus · Accepted Answer

Devaluing the currency means reducing its value in relation to other currencies. This is typically done by policy makers by decreasing the pegged value of the domestic currency (i.e. the value at which it is fixed in relation to another currency). This makes the domestic currency worth less compared to other currencies, which can make exports cheaper and more attractive to buyers abroad, thereby stimulating economic growth.

When Policy Makers Decide to Devalue the Currency, Such an Action