Match the following:
| 1. | Economic reforms of 1990 | A. | Appreciation of dollar |
| 2. | 1 dollar = Rs 50 to 1 dollar = Rs 70 | B. | Demand of foreign exchange |
| 3. | 1 dollar = Rs 50 to 1 dollar = Rs 30 | C. | Devaluation of rupee |
| 4. | Indian government imported candles | D. | Depreciation of dollar |
Answer & explanation
Correct answer: option 2
The correct answer is option 2: 1-C, 2-A, 3- D, 4-B
| 1. | Economic reforms of 1990 | C. Devaluation of rupee | |
| 2. | 1 dollar = Rs 50 to 1 dollar = Rs 70 | A. Appreciation of dollar | |
| 3. | 1 dollar = Rs 50 to 1 dollar = Rs 30 | D. Depreciation of dollar | |
| 4. | Indian government importing candles | B. Demand of foreign exchange | |
During the balance of payment crisis in the 1990s, the Indian government devalued the Indian currency to increase the number of exports of the country to improve the BoP position of the country.
1 dollar = Rs 50 to 1 dollar = Rs 70, it indicates increase in the exchange rates- depreciation of domestic currency/appreciation of foreign currency.
1 dollar = Rs 50 to 1 dollar = Rs 30, which indicates a decrease in the exchange- appreciation of the domestic currency/depreciation of the foreign currency.
The demand for foreign exchange arises when we have to make payments in the foreign currency thus, the import of candles means payment in foreign currency thus, leading to an increase in the demand of foreign currency