Jimmy imported a crockery set which was of 10 dollar and paid Rs 700 for it 2 years back, but now that same crockery set was gifted to him by his friend and the cost for that 10 dollar set reduced to 500 only. What do you think happened?

Either 1 or 2

In the above question, the exchange rate between India and the country from which import was done has fallen. Revaluation is the term used when exchange rate is influenced due to government whereas, appreciation is the term used when exchange rate is influenced due to market forces of demand and supply. In both the case the exchange rate falls. Thus, the answer is option 4 i.e. either 1 or 2