UPSC Prelims 2021 · GS Paper 1 · Q98

Economy

Medium · Currency devaluation effects

Consider the following statements about the necessary effects of a currency devaluation:

1. It necessarily makes a country's exports cheaper and more competitive in foreign markets.

2. It necessarily increases the foreign (international) value of the domestic currency.

3. It necessarily improves the country's trade balance, regardless of the price elasticity of demand for its exports and imports.

Which of the statements given above is/are correct?