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A policy initiatedby the indialn Government had an adverse inpacct on the value of of Rupee in relation to foreign exchange. What does this indicate ? Discuss this with the help at a numerical example. Aslo explain its effect on the exports and imports of the economy. |
Answer» <html><body><p></p>Solution :Adverse Impact on the value of Rupee in relation to <a href="https://interviewquestions.tuteehub.com/tag/foreign-995515" style="font-weight:bold;" target="_blank" title="Click to know more about FOREIGN">FOREIGN</a> Exchange is know asDepreciation of domestic <a href="https://interviewquestions.tuteehub.com/tag/currency-940735" style="font-weight:bold;" target="_blank" title="Click to know more about CURRENCY">CURRENCY</a> <br/> Numerical <a href="https://interviewquestions.tuteehub.com/tag/example-978283" style="font-weight:bold;" target="_blank" title="Click to know more about EXAMPLE">EXAMPLE</a> : Suppose earlier, `1$=Rs. 70. ` If after the policy, the exchange rate changes to `1$=Rs 75`, then it indicates that rupee has depreciated.<br/>Effect on Exports : Due to depreciation of domestic currency, more good can be purchased from India with same amount of foreign currency. It means exports from India increases as they will <a href="https://interviewquestions.tuteehub.com/tag/become-389953" style="font-weight:bold;" target="_blank" title="Click to know more about BECOME">BECOME</a> <a href="https://interviewquestions.tuteehub.com/tag/relatively-621723" style="font-weight:bold;" target="_blank" title="Click to know more about RELATIVELY">RELATIVELY</a> cheaper. <br/> Effect on Import : It result in decreases in imports as foreign goods will become costlier now.</body></html> | |