Understanding Currency Devaluation
The question asks for the term describing a decrease in the external value of a country's currency relative to other currencies.
Analyzing the Options
Let's examine the given options:
- Option 1: Devaluation of currency: This term specifically refers to a deliberate downward adjustment of a country's currency value in terms of other currencies, typically set by a government or central bank. This matches the question's description of a reduction in external value.
- Option 2: Increase in purchasing power: This signifies that the currency can buy more goods or services, indicating an increase in its value, the opposite of what the question describes.
- Option 3: Economic growth: This refers to the increase in the production of goods and services in an economy. While related to currency strength, it's not the direct term for a reduction in external currency value.
- Option 4: Decrease in inflation: Lower inflation generally leads to an increase or stability in a currency's value, not a reduction in its external worth.
Conclusion on Currency Value
The most accurate term for the reduction in the external value of the domestic currency is Devaluation of currency.
Similar Questions
In the Balance of Payments, an increase in foreign exchange reserves appears under which category?
The Foreign Exchange Management Act (FEMA) was enacted in 1999 to replace the earlier FERA law. In which year did FEMA officially come into force?
- The price of one currency in terms of another is known as:
- The money invested by foreign MNC's is known as:
Important Questions from External Sector and Currency Exchange rate
Consider the following :
1. Foreign currency convertible bonds
2. Foreign institutional investment with certain conditions
3. Global depository receipts
4. Non-resident external deposits
Which of the above can be included in Foreign Direct Investments?
Procedure for online trading involve(s) which of the following step(s)?
I. Make an application to open a Demat Account and Online Trading Account.
II. Allocate funds from the bank account to the trading account.
III. Once the order is confirmed, it is placed in the stock exchange through the online trading system.
The balance of payments of a country is a systematic record of
What is the idea that a country should be self-sufficient and not participate in international trade called?
(A) : Devaluation results in expenditure switching in an economy.
(R) : Devaluation alters the composition of the current account of the balance of payments.
