MANAGEMENT

Detailed explanation-1: -Devaluation is the deliberate downward adjustment of a country’s currency value. The government issuing the currency decides to devalue a currency. Devaluing a currency reduces the cost of a country’s exports and can help shrink trade deficits.

Detailed explanation-2: -Devaluation is employed to eliminate persistent balance-of-payments deficits. For example, a devaluation of currency will decrease prices of the home country’s exports that are purchased in the import country’s currency.

Detailed explanation-3: -Also, governments may encourage devaluation if they have a large sum of government-issued sovereign debt, which is hampering the economy. By reducing the value of the currency, it will make debt payments cheaper over time.

Detailed explanation-4: -Countries devalue their currencies to reduce trade deficits, lower the cost of debt, increase exports and decrease imports. However, devaluation can create tensions in the international markets and foster global uncertainty.

Detailed explanation-5: -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.