Question : What is the primary objective of a country when it undertakes currency devaluation?
Option 1: To increase the value of its currency
Option 2: To stabilize the exchange rate
Option 3: To reduce the value of its currency
Option 4: To achieve currency convertibility
Correct Answer: To reduce the value of its currency
Solution : The correct answer is c) To reduce the value of its currency
The primary objective of a country when it undertakes currency devaluation is to reduce the value of its currency relative to other currencies. Currency devaluation is a deliberate policy action taken by a country's government or central bank to intentionally lower the exchange rate of its currency.
By devaluing its currency, a country aims to make its exports more competitive in international markets. A lower currency value means that the country's goods and services become relatively cheaper for foreign buyers. This can lead to an increase in export volumes and potentially stimulate economic growth.
Additionally, currency devaluation can also make imports more expensive, which can discourage imports and promote domestic consumption and production. It can also help address trade imbalances, as a lower currency value may make imports relatively more expensive and encourage domestic production and consumption.
It's important to note that currency devaluation can have various economic and social implications, and its effectiveness and consequences depend on a range of factors such as the country's economic structure, trade relationships, and policy coordination.
Question : A country's central bank can intervene in the foreign exchange market to influence the value of its currency. This is known as ________.
Option 1: exchange rate targeting
Option 2: currency manipulation
Option 3: foreign exchange intervention
Option 4: exchange rate pegging
Question : In the context of foreign exchange rates, what does the term "appreciation" refer to?
Option 1: Increase in the value of a currency
Option 2: Decrease in the value of a currency
Option 3: Stable value of a currency
Option 4: Convertibility of a currency
Question : In the context of foreign exchange rates, what does the term "depreciation" refer to?
Question : What term is used to describe the situation when a country's currency value is fixed to another currency or a basket of currencies?
Option 1: Floating exchange rate.
Option 2: Managed float system.
Option 3: Fixed exchange rate.
Option 4: Pegged exchange rate.
Question : What is the term used to describe the exchange rate regime where a currency's value is fixed to another currency or a basket of currencies?
Option 1: Floating exchange rate
Option 2: Managed float exchange rate
Option 3: Pegged exchange rate
Option 4: Currency board arrangement
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