The main reasons why governments sometimes chose to devalue their currencies is are:
A) devaluation allows the government to fight domestic unemployment by stimulating export sector.
B) devaluation improves the current account balance.
C) devaluation preserves foreign reserves held by the central bank.
D) All of the above.

Question

Quizplus · Accepted Answer

Devaluation is often used as a tool by governments to achieve multiple objectives. By reducing the value of its currency, a government can stimulate its export sector, making its goods more price-competitive in global markets. This, in turn, can help to combat domestic unemployment by boosting demand for domestically produced goods and services. Additionally, devaluation can improve a country's current account balance by making its imports more costly and reducing the outflow of capital. Finally, devaluation can preserve foreign reserves held by a country's central bank by reducing the need to dip into these reserves to defend the value of the currency. All of these reasons may lead governments to choose to devalue their currencies.

The Main Reasons Why Governments Sometimes Chose to Devalue Their