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Foreign exchange policy: What does ‘‘devaluation’’ of a currency mean? Focus on the exchange-rate meaning under a fixed/managed regime. Choose the correct option.

Q: Foreign exchange policy: What does ‘‘devaluation’’ of a currency mean? Focus on the exchange-rate meaning under a fixed/managed regime. Choose the correct option.

Concept Devaluation is an official downward adjustment of a currency’s parity under fixed/managed rates, making exports cheaper and imports costlier. Final Answer Official reduction in the external value of the domestic currency

Difficulty: Easy

Official reduction in the external value of the domestic currency
Market-driven appreciation of the domestic currency
Abolition of multiple exchange rates
Temporary suspension of convertibility

Correct Answer: Official reduction in the external value of the domestic currency

Explanation:

Concept

Devaluation is an official downward adjustment of a currency’s parity under fixed/managed rates, making exports cheaper and imports costlier.

Final Answer
Official reduction in the external value of the domestic currency

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