Under a fixed exchange rate system,if the government decides to devalue its currency,net exports will ________ and the IS curve will shift to the ________.
A) increase; left
B) increase; right
C) decrease; left
D) decrease; right

Question

Quizplus · Accepted Answer

Devaluing the currency makes exports cheaper and imports more expensive, leading to an increase in net exports. This increase in net exports shifts the IS curve to the right, indicating higher aggregate demand.

Under a Fixed Exchange Rate System,if the Government Decides to Devalue