CA Foundation · Business Economics · International Trade
If the exchange rate moves from ₹80 per US dollar to ₹84 per US dollar, the rupee has:
The rupee has depreciated, and Indian exports become cheaper in dollar terms. Since ₹84 is now needed for one dollar instead of ₹80, the rupee buys fewer dollars, so foreign buyers pay less in dollars for the same rupee-priced goods, while imports cost Indians more.
- AAppreciated, making Indian exports costlier to foreigners
- BDepreciated, making Indian exports cheaper in dollar termsCorrect
- CAppreciated, making imports cheaper for Indians
- DDepreciated, making imports cheaper for Indians
Explanation
More rupees are now needed to buy one dollar, so the rupee has depreciated. An Indian good priced at ₹840 falls from $10.50 to $10, making exports cheaper for foreign buyers. Imports become costlier in rupee terms, so the last option is wrong.
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