Question

Currency devaluation ___________ the cost of foreign goods and _______ the cost of domestic goods to foreign firms.

Answer 1

increases

reduces

Step-by-step explanation:

Devaluation is when the value of a currency is deliberately adjusted downward relative to the value of another currency.

For example, a dollar can be exchanged for 40 pesos. the Mexican government decides to devalue their currency. After devaluation, a dollar is now being exchanged for 60 pesos. This is an example of devaluation.

If a burger costs $5, before devaluation, the burger would cost 200 pesos to a Mexican before devaluation. After, it would cost 300 pesos. We can see that foreign goods becomes more expensive after devaluation.

If a taco costs 40 pesos, an American would pay $1 for a taco. After devaluation, a taco would cost $0.7. We can see the domestic goods become cheaper to foreigners