Question

. The president of Venezuela announced that the country would be devaluating the bolivar for the fifth time in nine years. The official rate is falling from 4.3 bolivars to the dollar, to 6.3, a 32% devaluation. By increasing the bolivar value of exports of oil to the US and other nations, the government hopes to alleviate a budget crisis caused by its increasing reliance on borrowing to meet spending obligations. In response to the announcement, the people of Venezuela lined up today to buy televisions, electronics, and airline tickets in order to protect themselves from projected price increases. By devaluating the bolivar, the president of Venezuela has followed the law of supply and demand. allowed the exchange rate to remain unchanged. increased the number of bolivars needed to buy one dollar. decreased the number of bolivars needed to buy one dollar.

Answer 1

Answer:

By devaluating the bolivar, the president of Venezuela has increased the number of bolivars needed to buy one dollar.

Explanation:

Devaluation is a form of currency reform that involves writing down the value of a currency with a fixed exchange rate. The opposite of devaluation is revaluation. At a floating exchange rate, a decrease in the value of the currency is called a depreciation and it is not possible to control a depreciation. A devaluation is usually done with the aim of improving the country's current account, ie the net of a country's business with foreign countries. A devaluation benefits exports and hinders imports. People who borrowed money in foreign currency are disadvantaged. As a devaluation makes imported goods more expensive in terms of domestic currency, inflation risks increasing.