The devaluation of a country's currency:
A) makes foreign products more expensive for consumers in that country.
B) increases foreign demand for that country's exports.
C) can lead to deflation in that country.
D) A and B

Question

Quizplus · Accepted Answer

Devaluation of a country's currency makes foreign products more expensive for consumers in that country, which can lead to an increase in demand for domestically produced goods. At the same time, it makes the country's exports cheaper for foreign buyers, which can increase demand for those exports. Therefore, both options A (makes foreign products more expensive for consumers in that country) and B (increases foreign demand for that country's exports) are correct. Option C (can lead to deflation in that country) is not necessarily true in all cases, as devaluation can also increase inflation.

The Devaluation of a Country's Currency