[Solved] The major aim of devaluation is to -

Q.	The major aim of devaluation is to -
A.	encourage imports
B.	encourage exports
C.	encourage both exports and imports
D.	discourage both exports and imports
Answer» B. encourage exports
Explanation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or othermonetary units with which that currency can be exchanged. 'Devaluation' means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. There are two implications for a currency devaluation. First, devaluation 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.

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