ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -No, the devaluation of currency is not the same as depreciation. Reduction of the value of currency in floating exchange rate is known as depreciation and reducing the value of currency in fixed exchange rate is known as depreciation.

Detailed explanation-2: -Devaluation is reduction in value of domestic currency by the government under fixed exchange rate system.It is a deliberate effort. On the other hand, Depreciation is decrease in value of domestic currency due to market forces of demand and supply under flexible exchange rate system.

Detailed explanation-3: -However, both devaluation and depreciation lead to a fall in the value of the domestic currency in relation to the foreign currency. Consequently, domestic goods become cheaper in terms of foreign currency. Accordingly, exports tend to rise (while imports are discouraged).

Detailed explanation-4: -Depreciation is the fall in the value of domestic currency in relation to a foreign currency, it is the free play of the forces of demand and supply of foreign exchange in foreign exchange market the government has no role in it. Devaluation is a desired fall in the value of a rupee.

Detailed explanation-5: -Detailed Solution. The correct answer is a Reduction in the value of a currency vis-a-vis major internationally traded currencies. Devaluation occurs when a country intentionally reduces the value of its currency relative to one or more foreign countries.