An Extenal Devaluation is simply lowering the value of a currency. An Internal Devaluation is trickier, it implies that domestic prices fall (and hence exports become more competitive abroad). Hailed as the the new form of expenditure switching and reducing, we now also have Fiscal Devaluations if internal devaluations are not feasible.
1. Describe the major
thesis, the central idea, or set of ideas in the reading.
2. Use the TB/Y diagram to outline how a fiscal devaluation would work (assume lower prices shift the x-m curve only).