Question

1. If the price of one US dollar falls from Rs.76 to Rs. 72, the Indian currency has ------
A) Depreciated b) Appreciated. c) Devalued.
d) none of the above ​

Answer 1

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• If the price of one US dollar falls from Rs.76 to Rs. 72, the Indian currency has Appreciated.

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Answer 2

Answer:

If the price of one US dollar falls from Rs.76 to Rs. 72, the Indian currency has appreciated.
Thus, the correct answer is b) Appreciated.

Explanation:

Appreciation of currency:
Currency appreciation refers to an increase in the value of one currency compared to the other, say Indian Rupee to US Dollar. Currencies appreciate against each other due to several factors such as a change in government policy, interest rates, the balance of payments, business cycles, etc.

Example: If due to a change in the fiscal policy of the Indian Government, the value of the Indian Rupee rises in relation to US Dollar, the Indian Rupee is said to have appreciated,
OR
If, due to significant changes in the trade balances, say, the USA faces a BOP deficit, the value of the US Dollar falls in relation to the Indian Rupee; the Indian Rupee is said to have appreciated.

Thus, in the given question, since the US dollar falls from Rs.76 to Rs.72, the Indian currency has appreciated.

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