WORLD HISTORY

Detailed explanation-1: -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.

Detailed explanation-2: -When inflation is high, the value of a country’s currency weakens. This is because goods become more expensive, and it becomes less attractive for investors to do business. The inverse is also true.

Detailed explanation-3: -Depreciation reduces the value of a country’s currency when compared with the currency of other countries. Depreciation discourages imports because the imported goods become more expensive due to reduction in the value of currency. As the goods become more and more expensive it leads to inflation.

Detailed explanation-4: -Retirees and People Earning Fixed-Incomes Inflation causes price levels to rise, lowering the real value of money and your purchasing power. So if inflation leads to a 5% increase in consumer prices, you can afford 5% less than you did earlier unless your wage increases.

Detailed explanation-5: -Time value of money exists due to inflation and preference of people for present consumption. On account of inflation, you might not be able to buy the same amount of goods in future compared to today as the purchasing power of money decreases due to inflation.

Detailed explanation-6: -The answer is d. control the supply of money in the economy.