ECONOMICS
BALANCE OF TRADE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Depreciation of currency
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Appreciation of currency
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Either A or B
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None of the above
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Detailed explanation-1: -Currency appreciation is an increase in the value of one currency in relation to another currency. Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances, and business cycles.
Detailed explanation-2: -The correct option is C exchange. Exchange rate refers to the price of foreign currency in terms of the domestic currency.
Detailed explanation-3: -Appreciation of the currency implies that lesser rupees are required to buy a dollar, or that a dollar can now buy goods worth lesser rupees than before. Accordingly, exports are likely to take a hit. On the other hand, imports are likely to increase.
Detailed explanation-4: -A currency is said to appreciate when the base currency becomes more expensive in the currency pair w.r.t. quote currency. So for the USD/INR pair where $1 = Rs. 75 previously and now is $1 = Rs. 76, the Dollar is said to have appreciated w.r.t. Indian rupees.
Detailed explanation-5: -The exchange rate is the price of one country’s currency with respect to another country’s currency; hence, it tells about the economic condition of the country. The forex market allows 24/7 trading, and currencies are traded in pairs, unlike stocks that can be sold or bought in solitary.