Skip to content

CSEET · Economic and Business Environment · Indian Financial Markets

The rupee-dollar spot rate moves from ₹80 per US dollar to ₹84 per US dollar. Which statement is correct about this change?

The rupee has depreciated because it now takes more rupees, ₹84 instead of ₹80, to buy one dollar. Dollar-priced imports therefore cost more in rupee terms, while Indian exports become cheaper for foreign buyers. The appreciation options reverse the direction of the movement.

  1. AThe rupee has appreciated, and Indian exports become costlier for foreign buyers
  2. BThe rupee has depreciated, and imports priced in dollars become costlier in rupee termsCorrect
  3. CThe rupee has appreciated, and imports priced in dollars become cheaper in rupee terms
  4. DThe rupee has depreciated, and Indian exports become costlier for foreign buyers

Explanation

More rupees are needed to buy one dollar, so the rupee has depreciated. A $1,000 import now costs ₹84,000 instead of ₹80,000, so imports are costlier in rupees. Exports become cheaper in dollar terms, which makes the exports-costlier options wrong.

Did you get it right without looking?

One question tells you little. A timed set on Indian Financial Markets shows your real accuracy, how long you take and where you lose marks.

Practise Indian Financial MarketsFree diagnostic mock

More Indian Financial Markets questions