Devaluation of currency will be more beneficial if prices of

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Q: 31 (CDS-II/2017)
Devaluation of currency will be more beneficial if prices of

question_subject: 

Economics

question_exam: 

CDS-II

stats: 

0,53,95,14,53,20,61

keywords: 

{'currency': [0, 1, 0, 3], 'devaluation': [0, 3, 0, 3], 'domestic goods': [0, 0, 0, 1], 'exports': [0, 0, 2, 1], 'importers': [0, 0, 0, 2], 'prices': [0, 5, 4, 14], 'imports': [0, 0, 0, 1]}

The correct answer is option 2: exports become cheaper to importers.

When a currency is devalued, it means that its value has decreased in relation to other currencies. This can have various effects on a country`s economy.

In this case, if the prices of domestic goods remain constant (option 1), it may not necessarily lead to significant benefits. The devaluation of currency can make imported goods more expensive, which can negatively impact consumers.

If imports remain constant (option 3), the devaluation of currency may still have some benefits, but it may not be as advantageous as option 2. A devalued currency can make imported goods relatively more expensive, potentially increasing the cost of production for domestic industries.

However, when exports become cheaper to importers (option 2), it can lead to several benefits. A devalued currency makes a country`s goods and services more affordable to buyers in other countries. This can increase the demand for exports, which can have positive effects on industries and the overall economy. It can also help to increase trade and improve a country`s balance of payments.