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Devaluation of a currency means
- a)reduction in the value of a currency vis-a-vis major internationally traded currencies
- b)permitting the currency to seek its worth in the international market
- c)fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currencies
- d)fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners
Correct answer is 'A'. Can you explain this answer?
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Devaluation of a currency meansa) reduction in the value of a currency...
reduction in the value of a currency vis-a-vis major internationally traded currencies
Explanation: A currency is considered devalued when it loses value relative to other currencies in the foreign exchange market. A currency's devaluation is the result of a nation's monetary policy. currency devaluation reduces the price of a country's domestic output. This has the potential to benefit the economy by helping to increase its export volume. Conversely, import volumes become stifled as the price of foreign-produced goods and services increases dramatically.
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Devaluation of a currency meansa) reduction in the value of a currency...
Devaluation of a currency means
Devaluation of a currency refers to the deliberate reduction in the value of a currency in relation to major internationally traded currencies. This is typically done by a country's central bank or monetary authority and is aimed at achieving certain economic objectives. Let's explore this concept further in detail.
Reduction in the value of a currency vis-a-vis major internationally traded currencies
Devaluation is characterized by a decrease in the exchange rate of a currency. It means that more units of the domestic currency are required to buy a unit of foreign currency. For example, if the exchange rate between the US dollar and the Indian rupee was initially 1 USD = 70 INR, and after devaluation, it becomes 1 USD = 75 INR, it means that the value of the Indian rupee has decreased.
Purpose of devaluation
Devaluation is often used as a policy tool by countries to achieve certain economic objectives, such as:
1. Boosting exports: A devalued currency makes a country's exports relatively cheaper in the international market. This can lead to an increase in export competitiveness and potentially stimulate economic growth.
2. Reducing trade deficit: By making imports relatively more expensive, devaluation can discourage imports and help reduce a country's trade deficit. This is because higher prices of imported goods make them less attractive for domestic consumers and businesses.
3. Attracting foreign investment: Devaluation can make a country's assets and investments relatively cheaper for foreign investors. This can encourage capital inflows, stimulate economic activity, and create employment opportunities.
4. Addressing balance of payments issues: Devaluation can help correct an imbalance in a country's balance of payments by making exports more competitive and reducing imports.
Conclusion
In conclusion, devaluation refers to the intentional reduction in the value of a currency in relation to major internationally traded currencies. It is often used as a policy tool to achieve various economic objectives such as boosting exports, reducing trade deficit, attracting foreign investment, and addressing balance of payments issues. Devaluation can have both positive and negative consequences, and its impact depends on the specific circumstances and objectives of the country implementing it.
Devaluation of a currency refers to the deliberate reduction in the value of a currency in relation to major internationally traded currencies. This is typically done by a country's central bank or monetary authority and is aimed at achieving certain economic objectives. Let's explore this concept further in detail.
Reduction in the value of a currency vis-a-vis major internationally traded currencies
Devaluation is characterized by a decrease in the exchange rate of a currency. It means that more units of the domestic currency are required to buy a unit of foreign currency. For example, if the exchange rate between the US dollar and the Indian rupee was initially 1 USD = 70 INR, and after devaluation, it becomes 1 USD = 75 INR, it means that the value of the Indian rupee has decreased.
Purpose of devaluation
Devaluation is often used as a policy tool by countries to achieve certain economic objectives, such as:
1. Boosting exports: A devalued currency makes a country's exports relatively cheaper in the international market. This can lead to an increase in export competitiveness and potentially stimulate economic growth.
2. Reducing trade deficit: By making imports relatively more expensive, devaluation can discourage imports and help reduce a country's trade deficit. This is because higher prices of imported goods make them less attractive for domestic consumers and businesses.
3. Attracting foreign investment: Devaluation can make a country's assets and investments relatively cheaper for foreign investors. This can encourage capital inflows, stimulate economic activity, and create employment opportunities.
4. Addressing balance of payments issues: Devaluation can help correct an imbalance in a country's balance of payments by making exports more competitive and reducing imports.
Conclusion
In conclusion, devaluation refers to the intentional reduction in the value of a currency in relation to major internationally traded currencies. It is often used as a policy tool to achieve various economic objectives such as boosting exports, reducing trade deficit, attracting foreign investment, and addressing balance of payments issues. Devaluation can have both positive and negative consequences, and its impact depends on the specific circumstances and objectives of the country implementing it.
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Devaluation of a currency meansa) reduction in the value of a currency...
The correct answer is reduction in the value of currency vis-a-vis major internationally traded currencies (A)
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Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer?
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Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer?.
Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer?.
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Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer?, a detailed solution for Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer? has been provided alongside types of Devaluation of a currency meansa) reduction in the value of a currency vis-a-vis major internationally traded currenciesb) permitting the currency to seek its worth in the international marketc) fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currenciesd) fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners Correct answer is 'A'. Can you explain this answer? theory, EduRev gives you an
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