The devaluation of a currency develops once ________.

Question

Quizplus · Accepted Answer

Devaluation occurs when the value of a currency falls in comparison to other currencies. One reason for this could be if a country's monetary authority (like the central bank) runs out of international reserves, which are used to support the value of the currency. When reserves are depleted, the authority may choose to devalue the currency in order to make exports more competitive and stimulate economic growth. The other options (A, C, D) do not necessarily lead to devaluation. An increase in the value of a country's currency (A) would be appreciated rather than devalued. The level of domestic income falling (C) could lead to other economic issues, but not necessarily devaluation. An increase in the domestic price level (D) might lead to inflation, but not necessarily devaluation.

The Devaluation of a Currency Develops Once ________