Let the exchange rate between US dollar and Indian rupee be ₹40/US dollar. Now it changes to ₹50/ US dollar. What does this mean?
i. Deprecation of Indian rupee
ii. Depreciation of US dollar
iii. Appreciation of Indian rupee
iv. Appreciation of US dollar
Answer & explanation
Correct answer: option 2
1 US Dollar = 40 rupees and then it increases to 1 US Dollar = 50 rupees. This means value of US dollar has increased, that is, appreciation of US Dollar. It also means that value of Indian rupees has decreased, that is, depreciation of Indian Rupee. From 1 Rupee = 1/40 Dollars it has decreased to 1 Rupee = 1/50 Dollars.