Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Indian Economic Development: Liberalisation, Privatisation and Globalisation - An Appraisal

Question:

Which of the following measure is undertaken by the government to increase the exports and decrease the imports?

Options:

Devaluation of rupee

Depreciation of rupee

Revaluation of rupee

Appreciation of rupee

Correct Answer:

Devaluation of rupee

Explanation:

Devaluation of a rupee results in increase in exports as with same amount of dollars an individual is able to buy commodities worth more rupees. For example: Exchange rate: 1 dollar = 50 rupees has changed to 1 dollar = 60 rupees i.e. devaluation of the currency. A foreign citizen initially got goods worth Rs 50 for a dollar but now he gets goods worth Rs 60. Thus, it encourages exports of a nation.  Similarly, in case of imports, they become expensive as we have to pay higher amount for 1 dollar product i.e. earlier we paid Rs 50 for a commodity worth 1 dollar but now, we need to pay Rs 60 for the same product. Thus, imports gets reduced.

Difference between devaluation and depreciation is that the former is done by the government whereas, latter one is influenced with market forces of demand and supply.