Answer: Option C
Answer: (c)
A country devalues its currency in order to promote exports. A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of devaluation.
First, devaluation makes the country’s exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports.
This may help to increase the country’s exports and decrease imports, and may therefore help to reduce the current account deficit. One typical example is Thailand in the 1998 Asian financial crisis.
The baht was pegged at 25 to the US dollar before the crisis. During the crisis, the slowdown in export growth caused Thailand to abandon the dollar peg and devalue its currency in order to promote exports.