The main reason(s) why governments sometimes choose to devalue their currencies is (are)
A) devaluation makes domestic goods more expensive in relation to foreign goods.
B) devaluation makes domestic services more expensive in relation to foreign services.
C) devaluation increases foreign reserves held by the central bank.
D) devaluation improves the current account and increases foreign reserves held by the central bank.
E) devaluation hurts foreign currencies.

Question

Quizplus · Accepted Answer

Governments sometimes devalue their currencies to improve their current account and increase foreign reserves held by the central bank. Devaluation makes domestic goods cheaper for foreign consumers, making them more attractive and boosting exports, while making foreign goods more expensive for domestic consumers, which reduces imports. This improves the current account balance, which in turn contributes to a buildup of foreign reserves.

The Main Reason(s) Why Governments Sometimes Choose to Devalue Their