ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Domestic currency has appreciated
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Domestic currency has depreciated
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Rupee value of import bill will increase
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Both a and c
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Detailed explanation-1: -When the demand for any currency increases, then its value also increases. This is called Appreciation. When the demand for any currency decreases, then its value also decreases. This is called depreciation. If we apply this to the Indian Rupee, we will find that the rupee is depreciating.
Detailed explanation-2: -Less rupees re needed to buy one dollar. It leads to rise in imports as the import is a component of the demand of foreign exchange.
Detailed explanation-3: -Devaluation is the fall in the value of domestic currency in relation to foreign currency. It is planned by the Central Bank in situation, when exchange rate is not determined by the forces of demand and supply.
Detailed explanation-4: -Investment outflows and repayment of international loans are sources of demand for foreign currency.