.classify each effect as caused by devaluation or revaluation. a. imports increase. b. if an inflationary gap exists, it falls. devaluation c. exports increase. d. the balance of payments on the current account increases. revaluation e. domestic goods become cheaper for holders of foreign currenc

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21-11-2022
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.classify each effect as caused by devaluation or revaluation. a. imports increase. b. if an inflationary gap exists, it falls. devaluation c. exports increase. d. the balance of payments on the current account increases. revaluation e. domestic goods become cheaper for holders of foreign currenc

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paridhivt paridhivt · Answer 1 · 2022-11-26T14:29:47+01:00

Devaluation, or the intentional reduction of the official exchange rate, lowers the value of the currency; in contrast, revaluation is an increase in the value of the currency.

Thus, the correct options are B, D.

What is Devaluation?

Devaluation is the intentional reduction in a country's currency's value in comparison to another currency, group of currencies, or currency standard. This monetary policy instrument is used by nations with fixed or semi-fixed exchange rates.

Devaluation is one option. It denotes a decline in one currency's value relative to another. Despite the fact that both suggest a currency loses value relative to another, we must not mistake them.

Devaluation may be advantageous to domestic businesses but may have a negative impact on the populace. Foreigners, on the other hand, stand to gain from devaluation, while international enterprises may suffer.

Learn more about Devaluation, here

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