2023 · Q32
Which of the following is/are the effects of devaluation or depreciation of currency?
- 1It leads to increase in imports and decrease in exports.
- 2It leads to increase in exports and decrease in imports.
- 3It leads to increase in domestic inflation.
- 4It leads to decrease in domestic inflation.
Select the correct answer using the codes given below.
General KnowledgeIndian Economy
- A1 and 3 only
- B1 and 4 only
- C2 and 3 only
- D3 only
Explanation
Devaluation makes exports cheaper abroad and imports costlier at home, so exports rise and imports fall (2), while costlier imports push up domestic prices through imported inflation (3). Statements 1 and 4 describe the reverse effects and are wrong. Hence 2 and 3 only.