Macroeconomics: Open Economy Macroeconomics · Class 12 · CBSE · Commerce Economics
If the exchange rate changes from ₹83 per US dollar to ₹80 per US dollar, which statement is correct, assuming other factors remain unchanged?
Practice question from Macroeconomics: Open Economy Macroeconomics (Class 12 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
easy · MCQ · Q-1609ED
If the exchange rate changes from ₹83 per US dollar to ₹80 per US dollar, which statement is correct, assuming other factors remain unchanged?
- A.The Indian rupee has appreciated, making imports from the United States cheaper in rupee terms.Correct answer
- B.The Indian rupee has depreciated, making imports from the United States cheaper in rupee terms.
- C.The US dollar has depreciated against the Indian rupee, making Indian exports more expensive in the United States.
- D.There has been no change in the relative value of the two currencies.
Solution
A fall in the rupees required to buy one US dollar means that the rupee has appreciated. Consequently, imports priced in dollars become cheaper when expressed in rupees, other factors remaining constant.
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