When income increases and due to increase in income the demand for foreign goods increases then in this scenario what impact does economy face on foreign exchange rate ? Option 1: Appreciation of domestic currency. Option 2: Devaluation of domestic currency. Option 3: No change in domestic currency rate. Option 4: Depreciation of domestic currency.

The answer is 'Depreciation of domestic currency.'. View full solution:

CUET Economics - When income increases and due to increase in income the demand for foreign goods increases then in this scenario what impact does economy face on foreign exchange rate ? | PYQs + Solutions

CUET Economics 2025 13 May Shift 2

Macro

Easy

Appreciation of domestic currency.

Devaluation of domestic currency.

No change in domestic currency rate.

Depreciation of domestic currency.

✅ Correct Option: 4