Currency Devaluation Boosts Exports and Employment

Steps:

• Devaluation makes domestic goods cheaper for foreign buyers, increasing export demand.
• Higher exports lead to increased production in export-oriented industries.
• Expanded production requires more workers, reducing unemployment.
• This stimulates overall economic activity without relying on imports.

Why C is correct:

• Devaluation lowers the relative price of domestic goods abroad, per the law of demand, raising foreign purchases and export volumes to create jobs.

Why the others are wrong:

• A: Devaluation raises import costs, potentially increasing production costs, which could worsen unemployment.
• B: Devaluation often signals economic weakness, eroding investor confidence rather than boosting it.
• D: Devaluation makes imports more expensive, decreasing demand for them and favoring domestic goods.

Final answer: C