SSC MTS EXAM

Detailed explanation-1: -Devaluation is the decision to reduce the value of a currency in a fixed exchange rate. A devaluation means that the value of the currency falls. Domestic residents will find imports and foreign travel more expensive. However domestic exports will benefit from their exports becoming cheaper.

Detailed explanation-2: -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.

Detailed explanation-3: -A devaluation leads to a decline in the value of a currency making exports more competitive and imports more expensive. Generally, a devaluation is likely to contribute to inflationary pressures because of higher import prices and rising demand for exports.