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Economics (AS & A Level) · Feb / March 2021 · Paper 12 · Question 22

9708Exchange rates

What will be the immediate effect of a devaluation of an economy's foreign exchange rate?

  1. AThe price of imported goods in the domestic currency will fall.
  2. BThe price of imported goods in the domestic currency will rise.
  3. CThe price of imported goods in the foreign currency will fall.
  4. DThe price of imported goods in the foreign currency will rise.

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Correct answer: B. The price of imported goods in the domestic currency will rise.

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