Economics Exchange Rate Systems Questions
Currency devaluation refers to a deliberate decrease in the value of a country's currency relative to other currencies in the foreign exchange market. This can be done by the government or central bank of a country in order to make its exports more competitive and boost its domestic economy. Devaluation typically occurs through a decrease in the exchange rate, meaning that more units of the domestic currency are required to purchase a unit of foreign currency. By devaluing its currency, a country can make its exports cheaper for foreign buyers, which can increase demand for its goods and services. However, devaluation can also lead to higher import prices, inflation, and reduced purchasing power for domestic consumers.