Multiple choice

If a country 'devalues' its currency, it is likely to have

  1. a floating exchange rate system

  2. a fixed exchange rate system

  3. falling exports

  4. a dirty float
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Devaluation involves a deliberate reduction in the currency's value by the government under a fixed exchange rate system. In floating systems, market forces determine value (appreciation/depreciation). Devaluation aims to boost exports and reduce trade deficits.

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