A currency devaluation impacts a country's economic activity in which of the following ways?
A.
Decreases inflation
B.
Decreases gross domestic product (GDP)
C.
Increases imports from merchandise trade countries
D.
Makes exports cost less in merchandise trade countries
The Answer Is:
D
This question includes an explanation.
Explanation:
Currency devaluation reduces the value of a country’s currency relative to others, making its exports cheaper and more competitive internationally. This stimulates demand for the country’s goods and services.
D is correctbecause devaluation reduces export costs, encouraging foreign buyers.
Ais incorrect because devaluation can increase inflation by raising the cost of imported goods.
Bis incorrect because GDP often rises due to increased export demand.
Cis incorrect because imports become more expensive after devaluation, reducing demand.
[Reference:SIE Study Guide, Chapter 2: International Trade and Currency, , ]
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