Question

Under standard assumptions, in the short run, currency devaluation causes a country's output to O rise. fall. remain unchanged.

Answer 1

Answer to fhe first question :

Rise

Explanation : Devaluation decreases the value of exports in the foreign market as a result demand for exports increases. In the same manner demand for imports in the domestic market decreases as a result domestic Consumer starts demanding domestic product. To fulfill this demand country's production expands and thus output increases.

Answer to second question

Falling

Explanation:

If investor believes that a country's currency is overvalued and that it is fixed and will not change , then he may cancel his plans of investing in the country throughh FDI or may even withdraw its assets ,by selling it, from that country . Exports becomes cheaper in such countries and imports expensive . All this would decrease the foreign reserve of the country.