The correct answer is Option 3: b is true, a is not
Here's why:
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a) When Indian government issues fresh currency with no change in forex reserves, Rupee will appreciate with respect to other currencies. This statement is incorrect. Issuing more currency without an increase in forex reserves typically leads to inflationary pressures and a potential depreciation of the currency, not appreciation.
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b) If an Indian expects Rupee to depreciate in near future, he will exchange Rupee for Dollar today and convert Dollar back to Rupee when Rupee depreciates. This statement is correct. If an individual expects the Rupee to lose value, they would convert their Rupees into Dollars to protect their value. They would then convert the Dollars back to Rupees when the Rupee has depreciated, gaining more Rupees in the process.
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