Devaluation (a)
Devaluation refers to the official reduction in the external value of a currency, meaning the government deliberately lowers the value of its currency in terms of foreign currencies.
Correct match: 5 (official reduction in external value of the currency).
Depreciation (b)
Depreciation refers to a decline in the market rate of exchange, meaning a currency loses its value in a floating exchange rate system due to market forces.
Correct match: 1 (decline in the market rate of exchange).
Deflation (c)
Deflation refers to a contraction of the money supply and a general decrease in price levels, which can also lead to a contraction of home currency.
Correct match: 2 (contraction of home currency).
Exchange control (d)
Exchange control refers to government-imposed restrictions on foreign exchange transactions, including foreign exchange rationing.
Correct match: 3 (foreign exchange rationing)..
Study Notes
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