Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Open Economy Macro Economics

Question:
In Flexible exchange rate system, when Indian residents visit US, Indian residents buy imported goods from US and foreign investors from US, take out money from Indian equities and bond markets, the exchange rate of Rupee with respect to Dollar will?
Options:
Appreciate
Depreciate
Won't change
Anything is possible
Correct Answer:
Depreciate
Explanation:
All these things increase demand for Dollar and decrease demand for Rupee.