Devaluation is effective when?

Assessment: JAMB UTME - Economics - 1993 Subject: Economics

Question 1 Report

Devaluation is effective when?
Answer Details
Devaluation is effective when the demand for exports is price elastic. This means that a decrease in the price of the country's currency will lead to a significant increase in the quantity of exports demanded. In this situation, the country's exports become cheaper relative to other countries, making them more attractive to foreign buyers, which can increase export revenue and improve the country's balance of trade. However, devaluation can also lead to an increase in the price of imports, which can cause inflation and negatively impact the domestic economy.
Read lesson note on Theory Of Price Determination (WAEC)
Read lesson note on The Theory Of Demand (JAMB)
Read lesson note on Economics As A Science (JAMB)
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