Which of the following best explains a government's motive for reducing the value of its currency?
A)Increase the trade balance and prevent the price level from falling further.
B)Increase the trade balance and prevent the price level from rising further.
C)Decrease the trade balance and prevent the price level from rising further.
D)Decrease the trade balance and prevent the price level from falling further.

Question

Quizplus · Accepted Answer

Reducing the value of its currency makes a country's exports cheaper and imports more expensive, which can increase the trade balance by boosting exports and reducing imports. It can also help prevent deflation (the price level from falling further) by making imported goods more expensive, which can contribute to rising prices domestically.

Which of the Following Best Explains a Government's Motive for Reducing