McqMate
| Q. |
Devaluation of currency leads to - |
| A. | expansion of export trade |
| B. | contraction of import trade |
| C. | expansion of import substitution |
| D. | All of the above |
| Answer» D. All of the above | |
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Explanation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. There are two implications for currency devaluation. First, de-valuation makes a country's exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country's trade deficit. Import substitution means promotion of export to replace imports. It is also fallout of devaluation. |
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