Question

Trading in foreign currencies has an effect on world trade. For example, a rise in the value of the local currency due to daily flows vis-à-vis other currencies makes exports:

Answer 1

Answer:

Exports will be discouraged and will become more expensive as now the foreign countries will now get lesser value from one unit of foreign currency as compared to the past.

Explanation:

As per the question, we know that the value of local currency has risen  vis-à-vis other currencies.

For example,

     If $1 = Rs 60  earlier, now  $1 = Rs 50 as the value of the local currency has risen.

Therefore, the foreigners will now derive less value from one unit of the dollar, as earlier they could get goods worth Rs 60 from $1 , but now , as the value has risen, $1 fetches them only goods worth Rs. 50.

Hence, this will discourage the foreigners to buy goods from India. Hence the value of exports will decrease.

Hence exports will become more expensive for the foreign countries.