Devaluation of currency will be more beneficial if prices of
domestic goods remain constant
exports become cheaper to importers
imports remain constant
exports rise proportionately
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC CDS-2 – 2017
– It increases the domestic currency price of imports, making them more expensive and less attractive to domestic buyers.
– The benefit of devaluation, primarily increased export competitiveness, is maximized if domestic costs and prices (especially of exportable goods) do not rise significantly.
– If domestic prices remain constant, the reduction in the foreign currency price of exports fully translates into a competitive advantage. If domestic prices rise, this advantage is eroded, making the devaluation less beneficial.