Question

4. Other things remaining same, when foreign currency becomes cheaper, the effect on national income is likely to be: *

1 point

(b) to fall

(a) to rise

(c) to rise or to fall

(d) to remain unaffected

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Answer 1

Other things remaining unchanged, when in a country the price of foreign currency rises, national income is likely to rise as it indicates that the greater flow of foreign exchange in the domestic economy promotes higher level of development. Hence, national income rises as the price of foreign currency rises.