GK
INDIAN ECONOMY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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reduction in the value of a currency vis-a-vis major internationally traded currencies
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permitting the currency to seek its worth in the international market
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fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currencies
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fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners
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Detailed explanation-1: -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.
Detailed explanation-2: -Devaluation is a downward adjustment to a country’s value of money relative to a foreign currency or standard. Many countries that operate using a fixed exchange rate tend to use devaluation as a monetary policy tool to control supply and demand.
Detailed explanation-3: -Devaluation is the deliberate downward adjustment of the value of a country’s money relative to another currency, group of currencies, or currency standard.
Detailed explanation-4: -One reason a country may devaluate its currency is to combat trade imbalances. Devaluation causes a country’s exports to become less expensive, making them more competitive on the global market.