Which of the following statements is true?

If exchange rate changes from $1 = ₹85 to$1 = ₹90

(A) Imports will fall.

(B) Imports will rise.

(C) Exports will rise.

(D) National income will rise.

Choose the correct answer from the options given below:

Option 1 -> When exchange rate changes from $1 = ₹85 to$1 = ₹90, the rupee depreciates. This makes imports expensive (A is true), exports cheaper and competitive (C is true), and increases net exports leading to higher national income (D is true). Statement B is false as imports fall, not rise.

Option 2 -> This option incorrectly includes statement (B) which claims imports will rise. When rupee depreciates, imports become costlier and fall, not rise.

Option 3 -> This option includes both (A) and (B) together, which is contradictory. Imports cannot both fall and rise simultaneously.

Option 4 -> This option incorrectly includes statement (B) and excludes statement (A). When rupee depreciates, imports definitely fall due to higher prices.

Hence, Option 1: (A), (C) and (D) only -> When the exchange rate changes from $1 = ₹85 to$1 = ₹90, the rupee depreciates (becomes weaker). This depreciation makes: (A) Imports more expensive (₹9000 vs ₹8500 for a $100 product), causing imports to fall; (C) Exports cheaper for foreign buyers (an ₹850 product costs$9.44 instead of $10), making exports rise; (D) Net exports (X-M) increase, which increases national income as Y = C + I + G + (X-M). Statement (B) is false as imports fall, not rise. -> correct