Question

In what way devaluation helps a country?

• A. Improvement in Balance of Payment situation
• B. Encourages exports
• C. Discourages imports
• D. All the three

Answer 1

The correct option is D All the three

A devaluation of the currency may help improve the balance of payments situation when it is in a deficit, as a devaluation makes it attractive to purchase domestic goods as it becomes relatively cheaper to do so thus the value of imports is likely to decrease and the value of exports is likely to increase.