Question : The major aim of devaluation is to:
Option 1: encourage imports
Option 2: encourage exports
Option 3: encourage both exports and imports
Option 4: discourage both exports and imports
Correct Answer: encourage exports
Solution : The correct option is to encourage exports .
Devaluation primarily serves to promote exports. A nation can lower the cost of its currency, increase exports and increase its competitiveness in the international market by devaluing its currency. A decision to devalue a currency causes it to lose value. Short-term effects include higher growth, export demand growth and inflation.
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