Discussion
The immediate effect of devaluation by a country is
Answer: D
Correct answer: all of the above
Devaluation makes the home currency cheaper, and all three follow at once. Imports become dearer, so demand for them falls; exports become cheaper abroad, so they are more competitive; and domestic producers competing against imports are protected by the higher price of the foreign goods. Whether the trade balance actually improves depends on the elasticities - the J-curve effect means it often worsens first.
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