A currency devaluation increases the cost of foreign goods and ____ the cost of domestic goods to foreign firms.
A) devalues
B) increases
C) balances
D) decreases
E) restricts

Question

Quizplus · Accepted Answer

When a currency is devalued, it becomes cheaper compared to foreign currencies. As a result, it becomes more costly for domestic consumers to purchase foreign goods, but the cost of domestic goods decreases for foreign firms as they are purchasing with a stronger currency. Therefore, the correct choice is D, which states that a currency devaluation decreases the cost of domestic goods to foreign firms.

A Currency Devaluation Increases the Cost of Foreign Goods and ____