Question

Which of the following measures was implemented by the government
in order to reduce current account deficit?
(a) Revaluation of the rupee (b) Strict exchange control
f) Devaluation of the rupee
(d) Import restrictions were increased
​

Answer 1

Answer:

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Answer 2

Option A) Revaluation of the rupee.

Revaluation of the rupee measures was implemented by the government in order to reduce current account deficit.

• Revaluation is the term used when the value of one currency increases in comparison to another currency at a set exchange rate. The appropriate term under the floating exchange rate regime would be appreciation.
• A revaluation is a calculated increase in a nation's official exchange rate compared to a predetermined baseline, like wage rates, the cost of gold, or an other currency.
• The government may revalue its currency to lower the current account surplus when exports exceed imports. Revaluation can lower import costs, which can lower the rate of inflation in the local economy, hence it can be done to control inflation.
• "The value of any currency, including Indian rupee, is determined by demand. When a currency's value rises in tandem with rising demand, this is referred to as appreciation.

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