{"id":86429,"date":"2025-06-01T03:46:48","date_gmt":"2025-06-01T03:46:48","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=86429"},"modified":"2025-06-01T03:46:48","modified_gmt":"2025-06-01T03:46:48","slug":"which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/","title":{"rendered":"Which of the following is\/are the effects of devaluation or depreciati"},"content":{"rendered":"<p>Which of the following is\/are the effects of devaluation or depreciation of currency ?<\/p>\n<ul>\n<li>1. It leads to increase in imports and decrease in exports.<\/li>\n<li>2. It leads to increase in exports and decrease in imports.<\/li>\n<li>3. It leads to increase in domestic inflation.<\/li>\n<li>4. It leads to decrease in domestic inflation.<\/li>\n<\/ul>\n<p>Select the correct answer using the code given below :<\/p>\n<p>[amp_mcq option1=&#8221;1 and 3 only&#8221; option2=&#8221;1 and 4 only&#8221; option3=&#8221;2 and 3 only&#8221; option4=&#8221;3 only&#8221; correct=&#8221;option3&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC CDS-2 &#8211; 2023<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-cds-2-2023.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-cds-2-2023\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">Devaluation or depreciation of a currency makes a country&#8217;s goods cheaper for foreign buyers (increasing exports) and foreign goods more expensive for domestic buyers (decreasing imports). It also tends to increase domestic inflation due to the higher cost of imports and potential demand-pull effects from increased exports.<\/section>\n<section id=\"pyq-key-points\">\n1.  **It leads to increase in imports and decrease in exports:** Incorrect. Depreciation makes imports more expensive, thus decreasing them. It makes exports cheaper, thus increasing them.<br \/>\n2.  **It leads to increase in exports and decrease in imports:** Correct. This is the primary intended effect of depreciation\/devaluation, improving the trade balance.<br \/>\n3.  **It leads to increase in domestic inflation:** Correct. Imports become more expensive, increasing the cost of imported raw materials and finished goods, leading to cost-push inflation. Increased foreign demand for domestic goods can also lead to higher prices if supply cannot keep up (demand-pull inflation).<br \/>\n4.  **It leads to decrease in domestic inflation:** Incorrect.<\/section>\n<section id=\"pyq-additional-information\">The effects of devaluation\/depreciation on trade balance are described by the Marshall-Lerner condition, which states that a currency devaluation will only improve the balance of trade if the sum of the price elasticities of demand for imports and exports is greater than one. Inflationary effects are a common side effect, especially in economies reliant on imports.<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Which of the following is\/are the effects of devaluation or depreciation of currency ? 1. It leads to increase in imports and decrease in exports. 2. It leads to increase in exports and decrease in imports. 3. It leads to increase in domestic inflation. 4. It leads to decrease in domestic inflation. Select the correct &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Which of the following is\/are the effects of devaluation or depreciati\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/#more-86429\">Detailed Solution<span class=\"screen-reader-text\">Which of the following is\/are the effects of devaluation or depreciati<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1088],"tags":[1105,1226],"class_list":["post-86429","post","type-post","status-publish","format-standard","hentry","category-upsc-cds-2","tag-1105","tag-external-sector-of-economy","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Which of the following is\/are the effects of devaluation or depreciati<\/title>\n<meta name=\"description\" content=\"Devaluation or depreciation of a currency makes a country&#039;s goods cheaper for foreign buyers (increasing exports) and foreign goods more expensive for domestic buyers (decreasing imports). It also tends to increase domestic inflation due to the higher cost of imports and potential demand-pull effects from increased exports. 1. **It leads to increase in imports and decrease in exports:** Incorrect. Depreciation makes imports more expensive, thus decreasing them. It makes exports cheaper, thus increasing them. 2. **It leads to increase in exports and decrease in imports:** Correct. This is the primary intended effect of depreciation\/devaluation, improving the trade balance. 3. **It leads to increase in domestic inflation:** Correct. Imports become more expensive, increasing the cost of imported raw materials and finished goods, leading to cost-push inflation. Increased foreign demand for domestic goods can also lead to higher prices if supply cannot keep up (demand-pull inflation). 4. **It leads to decrease in domestic inflation:** Incorrect.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which of the following is\/are the effects of devaluation or depreciati\" \/>\n<meta property=\"og:description\" content=\"Devaluation or depreciation of a currency makes a country&#039;s goods cheaper for foreign buyers (increasing exports) and foreign goods more expensive for domestic buyers (decreasing imports). It also tends to increase domestic inflation due to the higher cost of imports and potential demand-pull effects from increased exports. 1. **It leads to increase in imports and decrease in exports:** Incorrect. Depreciation makes imports more expensive, thus decreasing them. It makes exports cheaper, thus increasing them. 2. **It leads to increase in exports and decrease in imports:** Correct. This is the primary intended effect of depreciation\/devaluation, improving the trade balance. 3. **It leads to increase in domestic inflation:** Correct. Imports become more expensive, increasing the cost of imported raw materials and finished goods, leading to cost-push inflation. Increased foreign demand for domestic goods can also lead to higher prices if supply cannot keep up (demand-pull inflation). 4. **It leads to decrease in domestic inflation:** Incorrect.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T03:46:48+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Which of the following is\/are the effects of devaluation or depreciati","description":"Devaluation or depreciation of a currency makes a country's goods cheaper for foreign buyers (increasing exports) and foreign goods more expensive for domestic buyers (decreasing imports). It also tends to increase domestic inflation due to the higher cost of imports and potential demand-pull effects from increased exports. 1. **It leads to increase in imports and decrease in exports:** Incorrect. Depreciation makes imports more expensive, thus decreasing them. It makes exports cheaper, thus increasing them. 2. **It leads to increase in exports and decrease in imports:** Correct. This is the primary intended effect of depreciation\/devaluation, improving the trade balance. 3. **It leads to increase in domestic inflation:** Correct. Imports become more expensive, increasing the cost of imported raw materials and finished goods, leading to cost-push inflation. Increased foreign demand for domestic goods can also lead to higher prices if supply cannot keep up (demand-pull inflation). 4. **It leads to decrease in domestic inflation:** Incorrect.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/","og_locale":"en_US","og_type":"article","og_title":"Which of the following is\/are the effects of devaluation or depreciati","og_description":"Devaluation or depreciation of a currency makes a country's goods cheaper for foreign buyers (increasing exports) and foreign goods more expensive for domestic buyers (decreasing imports). It also tends to increase domestic inflation due to the higher cost of imports and potential demand-pull effects from increased exports. 1. **It leads to increase in imports and decrease in exports:** Incorrect. Depreciation makes imports more expensive, thus decreasing them. It makes exports cheaper, thus increasing them. 2. **It leads to increase in exports and decrease in imports:** Correct. This is the primary intended effect of depreciation\/devaluation, improving the trade balance. 3. **It leads to increase in domestic inflation:** Correct. Imports become more expensive, increasing the cost of imported raw materials and finished goods, leading to cost-push inflation. Increased foreign demand for domestic goods can also lead to higher prices if supply cannot keep up (demand-pull inflation). 4. **It leads to decrease in domestic inflation:** Incorrect.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T03:46:48+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/","url":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/","name":"Which of the following is\/are the effects of devaluation or depreciati","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T03:46:48+00:00","dateModified":"2025-06-01T03:46:48+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"Devaluation or depreciation of a currency makes a country's goods cheaper for foreign buyers (increasing exports) and foreign goods more expensive for domestic buyers (decreasing imports). It also tends to increase domestic inflation due to the higher cost of imports and potential demand-pull effects from increased exports. 1. **It leads to increase in imports and decrease in exports:** Incorrect. Depreciation makes imports more expensive, thus decreasing them. It makes exports cheaper, thus increasing them. 2. **It leads to increase in exports and decrease in imports:** Correct. This is the primary intended effect of depreciation\/devaluation, improving the trade balance. 3. **It leads to increase in domestic inflation:** Correct. Imports become more expensive, increasing the cost of imported raw materials and finished goods, leading to cost-push inflation. Increased foreign demand for domestic goods can also lead to higher prices if supply cannot keep up (demand-pull inflation). 4. **It leads to decrease in domestic inflation:** Incorrect.","breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-is-are-the-effects-of-devaluation-or-depreciati\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"UPSC CDS-2","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/upsc-cds-2\/"},{"@type":"ListItem","position":3,"name":"Which of the following is\/are the effects of devaluation or depreciati"}]},{"@type":"WebSite","@id":"https:\/\/exam.pscnotes.com\/mcq\/#website","url":"https:\/\/exam.pscnotes.com\/mcq\/","name":"MCQ and Quiz for Exams","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/exam.pscnotes.com\/mcq\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209","name":"rawan239","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/761a7274f9cce048fa5b921221e7934820d74514df93ef195a9d22af0c1c9001?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/761a7274f9cce048fa5b921221e7934820d74514df93ef195a9d22af0c1c9001?s=96&d=mm&r=g","caption":"rawan239"},"sameAs":["https:\/\/exam.pscnotes.com"],"url":"https:\/\/exam.pscnotes.com\/mcq\/author\/rawan239\/"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/86429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/comments?post=86429"}],"version-history":[{"count":0,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/86429\/revisions"}],"wp:attachment":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/media?parent=86429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/categories?post=86429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/tags?post=86429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}