85. Why do countries devalue their currencies?
1. To boost exports
2. To Shrink Trade Deficits
3. To Reduce Sovereign Debt Burdens
Select the correct answer using the codes given below
85. Why do countries devalue their currencies?
1. To boost exports
2. To Shrink Trade Deficits
3. To Reduce Sovereign Debt Burdens
Select the correct answer using the codes given below
The correct option is D All of the above
Countries opt for devaluation only to save the economy from external factors and boost export. As currency depreciate in the global parlance, exports become more favourable and imports unfavourable. This boosts the internal economy towards export and internal usage of own goods.
By devaluing the currency, trade deficits are lowered which also favours the balance of payments and thus helps the economy by providing temporary relief. A government may be incentivized to encourage a weak currency policy if it has a lot of government issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time.
Countries opt for devaluation only to save the economy from external factors and boost export. As currency depreciate in the global parlance, exports become more favourable and imports unfavourable. This boosts the internal economy towards export and internal usage of own goods.
By devaluing the currency, trade deficits are lowered which also favours the balance of payments and thus helps the economy by providing temporary relief. A government may be incentivized to encourage a weak currency policy if it has a lot of government issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time.
