The competitive advantage from devaluation is likely to be offset by:
A) lower export prices and lower import volumes.
B) higher prices for imported inputs to production and higher wage increases.
C) higher prices for imported inputs to production and lower export prices.
D) lower wage increases and lower import volumes.

Question

Quizplus · Accepted Answer

Devaluation makes imported goods more expensive, which can lead to higher costs for imported inputs used in production. Additionally, the inflationary pressure from more expensive imports can lead to higher wage demands from workers.

The Competitive Advantage from Devaluation Is Likely to Be Offset