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Devaluation of currency leads to

  • A.Fall in domestic prices
  • B.Increase in domestic prices
  • C.No impact on domestic prices
  • D.Erratic fluctuations in domestic prices

Answer: B

Devaluation leads to an increase in domestic prices.

Imports become dearer in home currency, and since fuel, fertiliser and industrial inputs are imported, costs rise through the economy. Exports also become more attractive, drawing goods away from the home market and pushing prices up further.

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