CUET Economics 2025 28 May Shift 1 PYQs

In an economy, to control a high balance of payment problem if government decided to reduce its currency value against globally accepted foreign currency, this process this known as:

Suppose that government bonds in country A pay 8 per cent rate of interest whereas equally safe bonds in country B yield 10 per cent. The interest rate differential is 2 per cent. Arrange the consequences of the same in sequential order.

(A) People will find investing in country B more attractive and will therefore demand less of country A's currency.

(B) Depreciation of country A's currency and an appreciation of country B's currency.

(C) Investors from country A will be attracted by the high interest rates in country B and will buy the currency of country B selling currency of country A.

(D) The demand curve for country A's currency will shift to the left and the supply curve will shift to the right.

Choose the correct answer from the options given below:

Arrange the following statements related to foreign exchange market (fixed exchange rate) in correct sequence.

(A) RBI intervenes to purchase the dollars for rupees in the foreign exchange market in order to absorb this excess supply.

(B) The government will fix a higher exchange rate by making the rupee cheaper for foreigners.

(C) Supply of dollars exceeds the demand for dollars.

(D) The Indian government wants to encourage exports.

Choose the correct answer from the options given below: