In the long run, devaluation is likely to have large effects on real output.

Question

Quizplus · Accepted Answer

Devaluation can temporarily boost demand for a country's exports by making them cheaper on the global market. However, in the long run, its effects on real output are limited as prices adjust. Devaluation can lead to inflation, which may offset the initial competitive advantage by increasing domestic prices, including those of exports. Additionally, the long-term impact on real output depends on various factors such as the elasticity of demand for exports and imports, productivity, and the economy's ability to adjust to changes.

In the Long Run, Devaluation Is Likely to Have Large