Devaluation of a currency makes imports more expensive, which can lead to increased demand for domestically produced goods, potentially causing inflation due to higher demand and increased costs of imported goods. It can also affect interest rates as the central bank may adjust them to control inflation or stabilize the currency.

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Devaluation Leads to

Question 23

Multiple Choice

Devaluation leads to

A) increasing the price of imports and stimulating greater demand for domestic products.
B) domestic inflation.
C) rise in domestic interest rates.
D) all the above

Correct Answer: