Question

Assertion (A): Ceteris Paribus, Devaluation of domestic currency leads to an increase in National Income of a nation. 

Reason (R): Devaluation of domestic currency refers to reduction in the value of domestic currency with respect to foreign currency, under the fixed exchange rate system. 

विकल्प

• Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). 

• Assertion (A) is true, but Reason (R) is false. 

• Assertion (A) is false, but Reason (R) is true. 

Answer 1

Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). 

Explanation:

• Devaluation of the home currency increases national income by allowing more domestic money to be traded for the same unit of foreign currency.
• This reduces the cost of domestic goods for foreigners, resulting in higher exports and lower imports. The country's central government intentionally devalues its currency under a fixed exchange rate structure.