The Importance of Currency Devaluation and its Effect on the Economy Assignment

The Importance of Currency Devaluation and its Effect on the Economy - Assignment Example It makes the country’s exports relatively cheaper to foreign countries. Devaluation makes the cost of living expenses to the country’s citizens as foreign products become expensive and, therefore, discourages imports. Food prices increase and become unaffordable to most people. Finally, it leads to an upsurge of foreign currency reserve and the exports become more than the imports. The Chavez administration took advantage of the devaluation of the bolivar. It increased its domestic monetary resources it gained from the sale of its oil exports. Upon the surge of devaluation, the Venezuelan regime received more bolivar for every dollar. It earned more from the sale of its oil exports and it, therefore, had enough money for domestic expenditure The predicting analysts were correct. Venezuela’s currency recently traded at approximately 80 percent less of the official and fixed exchange rate. The Venezuelan government has recently made several developments in its economy as it tries to ease the shortage of consumer goods and food, and make the dollar accessible. According to DolarToday.com, its new exchange rate stands at 64.74