Question : It means with same amount of dollar more goods can be purchased from domestic country. Which effect of depreciation is highlighted here?
Option 1: Increase in exports
Option 2: Decrease in imports
Option 3: Increase in the national income
Option 4: All of the above.
Correct Answer: Increase in exports
Solution : Depreciation of a domestic currency means a fall in the price of domestic currency in terms of foreign currency, where more amount of good can be purchase from domestic country. Hence Option A is correct.
Question : It means with same amount of dollar more goods can be purchased from foreign country. Which effect of appreciation is highlighted here?
Question : The domestic country will have to spend less domestic currency to import foreign goods. Which effect of depreciation is highlighted here?
Question : The domestic country will have to spend more domestic currency to import foreign goods. Which effect of depreciation is highlighted here?
Question : Net exports will decrease. Which effect of depreciation is highlighted here?
Question : Net exports will increase. Which effect of depreciation is highlighted here?
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