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When the government increases the exchange rate of domestic currency in terms of foreign currency(by making domestic currency costlier year) in a fixed exchange rate system, that increase called:

Solution

✅ Correct Option: 1

A deliberate government-driven increase in the value of the domestic currency under a fixed exchange rate regime (making it costlier relative to foreign currency) is called revaluation. Appreciation refers to the same rise but under a floating rate system.

Note: The NTA prompt contains a stray word ('costlier year'); we have read it as 'costlier', which does not affect the answer.

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