Assertion (A) : Devaluation of a currency may promote export. Reason (R): Price of the country’s products in the international market may fall due to devaluation.
✓ Correct answer: a) Both A and R are true and R is the correct explanation of A
ExplanationAssertion (A) is true : Devaluation reduces the value of a country’s currency relative to foreign currencies, making its exports cheaper and more competitive in the global market.This can lead to an increase in the demand for exports.Reason (R) is true: As the local currency weakens against for- eign currencies, goods from the devaluing country become cheaper for foreign buyers.This effectively reduces the inter- national price of these goods, resulting in increased demand for exports.For instance, after India’s 1991 devaluation, exports surged as Indian goods became more competitive globally.The Economic Survey (1991-92) confirmed that devaluation played a crucial role in boosting exports and improving India’s trade balance.Thus, Reason R correctly explains Assertion A. 292
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