Devaluation of a stat's currency:
Correct answer: B. causes a drop in demand for that currency
- A. increases the total portfolio value of foreigners who hold that currency
- B. causes a drop in demand for that currency
- C. increases confidence in a state's ability to meet its debts
- D. is rarely a quick fix for financial problems in the short term
Explanation
Devaluation lowers a currency's external value and can reduce confidence in it, often causing demand for the currency to fall. It may support exports, but it is not a guaranteed or painless solution to financial problems.
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Practise International Political Economy
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