ECONOMICS
FOREIGN CURRENCY MARKETS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Depreciate
|
|
|
Appreciate
|
|
|
No specific tendency
|
|
|
All of the above
|
Detailed explanation-1: -Depreciate against currencies of the countries with positive balance of payment and appreciate against countries with negative balance of payment. Answer» A. Depreciate.
Detailed explanation-2: -A change in a country’s balance of payments can cause fluctuations in the exchange rate between its currency and foreign currencies. The reverse is also true when a fluctuation in relative currency strength can alter balance of payments.
Detailed explanation-3: -(Q2) ‘A continuous deficit in B.O.P. results into ‘capital-flight’. Ans: True, we will have to export gold abroad to pay-off our creditors. (Q3) Greater flow of foreign exchange from ROW always reflect higher level of development of domestic economy.
Detailed explanation-4: -(i) ‘Make in India’ will increase supply (inflow) of foreign exchange in India causing improvement in the balance of payments position. (ii) Import of pulses will lead to outflow of foreign exchange from the country causing adverse effect on balance of payment position.