ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A a decrease in interest rates
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B a decrease in tax rates
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C a decrease in tariffs on imports
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D a decrease in public expenditure
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Detailed explanation-1: -f) When value of domestic currency is tied to the value of another currency, it is known as ‘Pegging’. g) When value of a currency is fixed in terms of some other currency or in terms of gold, it is known as ‘Parity value’ of currency.
Detailed explanation-2: -In general, when a currency loses value, people’s purchasing power declines as well because products-especially imported ones-cost more money. And when that causes a general rise in prices, it’s called inflation.
Detailed explanation-3: -Devaluation causes a country’s exports to become less expensive, making them more competitive on the global market. This in turn means that imports are more expensive, making domestic consumers less likely to purchase them.
Detailed explanation-4: -Understanding Devaluation Devaluation reduces the cost of a country’s exports, rendering them more competitive in the global market, which, in turn, increases the cost of imports. If imports are more expensive, domestic consumers are less likely to purchase them, further strengthening domestic businesses.