If ₹150 is required to buy 2 Dollar, instead of ₹100 earlier, then:

(A) Domestic currency has depreciated.
(B) Domestic currency has appreciated.
(C) The rupee value of the import bill will increase.
(D) Selling foreign exchange from its reserves by the reserve bank of India.

Choose the correct answer from the options given below:

(A), (C) and (D) only

The correct answer is Option (2) → (A), (C) and (D) only

Initial Situation:

• ₹100 buys $2

• This means the initial exchange rate is $1\; dollar=\; Rs\; 100/2\; =\; Rs\; 50$

New Situation:

• ₹150 is required to buy $2

• This means the new exchange rate is 1 dollar=Rs 150/2 = Rs 75

$The\; value\; of\; the\; Indian\; Rupee\; has\; changed\; from\; ₹50\; per\; dollar\; to\; ₹75\; per\; dollar.\; This\; means\; it\; now\; costs\; more\; rupees\; to\; buy\; one\; dollar,\; indicating\; that\; the\; value\; of\; the\; rupee\; has\; fallen\; i.e.depreciated.$

(A) Domestic currency has depreciated. Correct. Since ₹150 are now needed to buy 2 dollars instead of ₹100 earlier, the rupee has lost value against the dollar — this is depreciation.

(B) Domestic currency has appreciated. Incorrect. Appreciation means the rupee would be able to buy more dollars than before — here it’s the opposite.

(C) The rupee value of the import bill will increase. Correct. When the rupee depreciates, it takes more rupees to buy foreign goods priced in dollars. Hence, imports become costlier.

(D) Selling foreign exchange from its reserves by the Reserve Bank of India. Correct. To control depreciation and stabilize the rupee, RBI may sell dollars from its forex reserves in the market to increase dollar supply and reduce pressure on the rupee.