Discussion :: Indian Economy
- Devaluation of a currency means
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A.
fall in exchange value of a country by market forces |
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B.
reduction in external value/exchange value of currency by the government |
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C.
reduction in currency value due to wear and tear |
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D.
all of the above |
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Answer : Option C
Explanation :
When the country follows a fixed exchange rate regime the government constantly has to revalue and devalue the currency in order to maintain the pegged exchange rate. When there is upwards market pressure on the currency to appreciate, the central bank will artificially devalue the currency by buying up foreign reserves.
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