General Knowledge - Indian Economy - Discussion
Discussion Forum : Indian Economy - Indian Economy (Q.No. 43)
43.
Devaluation of currency will be more beneficial if
Discussion:
22 comments Page 3 of 3.
SATYAM said:
6 years ago
=> 1st case [1 $ = 70 Rs.]
1 pen price = 70 Rs. = 1 dollar, sold for 1.2 $ => profit =0.2 $.
=> 2nd case [1 $ = 100 Rs.]
1 pen price = 70 Rs. = 0.7 $, sold for 1.2 $ => profit =0.5$.
=> More profit when the price of exports remains constant.
1 pen price = 70 Rs. = 1 dollar, sold for 1.2 $ => profit =0.2 $.
=> 2nd case [1 $ = 100 Rs.]
1 pen price = 70 Rs. = 0.7 $, sold for 1.2 $ => profit =0.5$.
=> More profit when the price of exports remains constant.
Gourab said:
4 years ago
Devaluation is a measure taken by government to reduce the value of home currency in comparison to other countries. This makes home currency cheaper and foreign currency more costlier.
The main purpose of devaluation is to correct BOP deficit when the country have more imports than exports. As currency value decreases as a result of devaluation, it will be more costlier to import from foreign. On the otherhand devaluation will encourage other countries to import more. This means import will fall export rise.
Thus, Devaluation may lead to BOP equilibrium by equalizing exports and imports.
The main purpose of devaluation is to correct BOP deficit when the country have more imports than exports. As currency value decreases as a result of devaluation, it will be more costlier to import from foreign. On the otherhand devaluation will encourage other countries to import more. This means import will fall export rise.
Thus, Devaluation may lead to BOP equilibrium by equalizing exports and imports.
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