Assertion–Reason (Devaluation and Exports):\nAssertion (A): The country’s exports became very attractive in terms of price to importers.\nReason (R): The currency of the country was devalued.

Difficulty: Easy

Correct Answer: Both (A) and (R) are true, and (R) is the correct explanation of (A).

Explanation:


Introduction / Context:
This problem examines basic international economics: how nominal exchange rate changes affect the foreign-currency prices of a country’s exports and, therefore, export competitiveness.


Given Data / Assumptions:

  • A: Export prices became attractive to foreign buyers.
  • R: The domestic currency was devalued (i.e., it buys fewer units of foreign currency).
  • Standard assumption: pass-through from exchange rate to export prices is significant in the short run, ceteris paribus.


Concept / Approach:
Devaluation typically reduces the foreign-currency price of domestically produced goods (holding domestic costs and margins constant), improving price competitiveness of exports. We check truth of A and R and then causal adequacy of R in explaining A.


Step-by-Step Solution:
1) R is true by premise: devaluation occurred.2) If exporters adjust minimally, the foreign-currency price falls, making products “attractive” to importers abroad; hence A is true.3) The explanation is direct: devaluation lowers relative price, boosting price-based competitiveness; thus R correctly explains A.


Verification / Alternative check:
Export surges are often associated with sustained devaluation episodes, controlling for demand, costs, and non-price factors (quality, logistics).


Why Other Options Are Wrong:
(b) denies the clear price mechanism; (c)/(d) conflict with the given premises; “None” is unnecessary.


Common Pitfalls:
Ignoring other determinants (elasticities, hedging, imported inputs) which may dampen effects. But they do not negate the basic explanatory link.


Final Answer:
Both A and R are true, and R correctly explains A.

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