Multiple choice

The devaluation of currency of a country is done when __________ (i) It has adverse balance of payments. (ii) It has favourable balance of payments.

  1. Both (i) and (ii) are correct.

  2. Both (i) and (ii) are incorrect.

  3. Only (i) is correct.

  4. Only (ii) is correct.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Devaluation makes a country's exports cheaper and imports more expensive, which helps correct an adverse (negative) balance of payments. It is not used when the balance of payments is favourable. This is a standard macroeconomic policy tool.

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