Question
Economics Question on International Economics
The value of the US dollar changes due to the market forces of demand and supply of foreign exchange i.e., from 1 USD = 81 to 2 USD = 161. What will this be termed as?
A
Appreciation of rupee
B
Depreciation of rupee
C
Revaluation of rupee
D
Devaluation of rupee
Answer
Depreciation of rupee
Explanation
Solution
When the value of the rupee falls compared to the US dollar, it is referred to as depreciation. In this case, more rupees are required to buy the same amount of USD (from 81 to 161 per USD), indicating depreciation of the rupee.