Question

read this news report about a planned devaluation of the bolivar, the currency of venezuela.
the president of venezuela announced that the country would be devaluating the bolivar for the fifth time in nine years. the official rate is falling from 4.3 bolivars to the dollar, to 6.3, a 32% devaluation. by increasing the bolivar value of exports of oil to the us and other nations, the government hopes to alleviate a budget crisis caused by its increasing reliance on borrowing to meet spending obligations.
in response to the announcement, the people of venezuela lined up today to buy televisions, electronics, and airline tickets in order to protect themselves from projected price increases.
by devaluating the bolivar, the president of venezuela has
○ followed the law of supply and demand.
○ allowed the exchange rate to remain unchanged.
○ increased the number of bolivars needed to buy one dollar.
○ decreased the number of bolivars needed to buy one dollar.

Explanation:

To solve this, we analyze each option:

• Option 1: Devaluation is a policy decision, not just following supply - demand (which is more about market - driven changes). So this is incorrect.
• Option 2: The exchange rate is changing (from 4.3 to 6.3 bolivars per dollar), so it's not unchanged. Incorrect.
• Option 3: Devaluation means that more of the domestic currency (bolivars) is needed to buy one unit of a foreign currency (dollar). Since the rate went from 4.3 to 6.3 bolivars per dollar, more bolivars are needed. This is correct.
• Option 4: As explained above, more (not fewer) bolivars are needed. Incorrect.

Answer:

C. increased the number of bolivars needed to buy one dollar.