Devaluation of currency leads to A. fall in domestic prices B. increase in domestic prices C. no impact on domestic prices D. erratic fluctuations in domestic prices

The correct answer is: B. increase in domestic prices.

Devaluation of currency means that the value of a country’s currency has decreased relative to other currencies. This means that it takes more of the domestic currency to buy the same amount of foreign currency. This can have a number of effects on the domestic economy, including:

• Increased prices for imported goods: When the value of the domestic currency decreases, it becomes more expensive for businesses to import goods. This is because they have to pay more for the foreign currency that they need to buy the goods. This can lead to higher prices for consumers.
• Increased demand for domestic goods: When the value of the domestic currency decreases, it becomes cheaper for foreign buyers to purchase domestic goods. This can lead to increased demand for domestic goods, which can push up prices.
• Decreased demand for exports: When the value of the domestic currency decreases, it becomes more expensive for foreign buyers to purchase domestic goods. This can lead to decreased demand for exports, which can hurt the domestic economy.

Overall, devaluation of currency can lead to increased prices for consumers and businesses. It can also lead to decreased demand for exports. These effects can have a negative impact on the domestic economy.

Here is a brief explanation of each option:

• A. Fall in domestic prices: This is not the correct answer because devaluation of currency leads to increased prices for imported goods, which can push up prices for consumers.
• B. Increase in domestic prices: This is the correct answer because devaluation of currency leads to increased prices for imported goods, which can push up prices for consumers.
• C. No impact on domestic prices: This is not the correct answer because devaluation of currency does have an impact on domestic prices.
• D. Erratic fluctuations in domestic prices: This is not the correct answer because devaluation of currency does not necessarily lead to erratic fluctuations in domestic prices.