Impact of Devaluation
Response to the following problem:
The inflation rate in Yinland was 14 percent last year. The government of Yinland just devalued its currency (the yin) by 40 percent against the dollar. Even though it produces products similar to those of the United States, it has much trade with the United States and very little trade with other countries. It presently has trade restrictions imposed on all non-U.S. countries.
Will the devaluation of the yin increase or reduce inflation in Yinland? Briefly explain.