Question:
A country with a fixed or managed exchange rate would consider i.___________________ its currency to gain competitive advantage vis-à-vis its trade partners.
ii. Briefly Explain?
Answer:
The country will devalue its currency. Devaluation will lead to lowering of cost of the export goods of the country while increasing the cost of the imports. This will boost export demand and curtail imports demand. Consequently, the trade balance will improve.