Devaluation of currency leads to
A
fall in domestic prices
B
increase in domestic prices
C
no impact on domestic prices
D
erratic fluctuations in domestic prices
Correct Answer: increase in domestic prices
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.