Macro

Balance of Payments

Medium

If ₹150 is required to buy 2 Dollar, instead of ₹100 earlier, then:

(A) Domestic currency has depreciated.

(B) Domestic currency has appreciated.

(C) The rupee value of the import bill will increase.

(D) Selling foreign exchange from its reserves by the reserve bank of India.

Choose the correct answer from the options given below:

(A), (B) and (D) only

(A), (C) and (D) only

(A), (B), (C) and (D)

(B), (C) and (D) only

✅ Correct Option: 2

Option 1 -> Incorrect. Includes (B) which states domestic currency appreciated, but it actually depreciated.

Option 2 -> Correct. (A) Rupee depreciated as more rupees needed per dollar; (C) Import bills in rupees increase; (D) RBI sells forex reserves to stabilize rupee.

Option 3 -> Incorrect. Includes (B) which contradicts (A) - currency cannot both appreciate and depreciate.

Option 4 -> Incorrect. Includes (B) which is wrong - the rupee depreciated, not appreciated.

Hence, Option 2: (A), (C) and (D) only -> Initially ₹50 = $1, now ₹75 =$ 1. This means: (A) The rupee has depreciated since more rupees are needed to buy the same dollar amount. (C) Import bills denominated in dollars will cost more in rupee terms, increasing the rupee value of imports. (D) To counter such depreciation, RBI typically sells foreign exchange from its reserves to increase dollar supply and support the rupee value. Statement (B) is incorrect as the currency depreciated, not appreciated. -> correct

2025: 30 May Shift 2

In modern economies, countries interact through various channels, Which market is not an example of these linkages?

2026: 11 May Shift 1

Under which exchange rate appreciation and depreciation takes place and under which exchange rate devaluation and revaluation takes place respectively?

2022: 30 Aug Shift 2

Match List - I with List - II.

List - I (Concept)	List - II (Meaning)
(A) Trade surplus	(I) Excess of the payments for import of goods over the receipts for export of goods
(B) Devaluation of currency	(II) Excess of exports of goods over the imports of goods
(C) Trade deficit	(III) Fall in the external value of a domestic currency as notified by the government of the country
(D) Balance of trade	(IV) Difference between the value of exports and value of imports of goods of a country

Choose the correct answer from the options given below :

2025: 30 May Shift 1

What could persistent current account deficit lead to?

2025: 13 May Shift 2

When the central bank intervenes to control the exchange rate through sell/purchase of foreign currencies, this process is called______

2025: 22 May Shift 1

For example, there is an increase in international travel by Indians. What will be the effect on the domestic currency?

(A). Demand curve shifts upward and right to the original demand curve.

(B). Demand for foreign goods and services increases.

(C). Depreciation of domestic currency (rupees) in terms of foreign currency (dollars).

(D). The value of rupees in terms of dollars has fallen and value of dollar in terms of rupees has risen.

Choose the correct answer from the options given below:

Solution

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