GK
INDIAN ECONOMY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fall in domestic prices
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increase in domestic prices
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cant be predicted
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None of above
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Detailed explanation-1: -Higher exports due to the devaluation in the currency will increase aggregate demand, which raises the gross domestic product (GDP) and inflation. Inflation is factored in because suppliers are faced with higher import prices, which causes manufacturers to increase cost price and, respectively, market price as well.
Detailed explanation-2: -A devaluation of the domestic currency raises the price of foreign goods relative to the domestic goods. As prices of imports are increasing, the total payments to importers could rise or fall depending on the elasticities of demand for imports.
Detailed explanation-3: -Detailed Solution. The correct answer is 1 only. Devaluation of a currency means a reduction in the value of a currency vis-a-vis major internationally traded currencies.