Which of the following statement/statements are true? Statement 1: If foreign exchange rate increases, exports will increases. Statement 2: When Indian currency appreciates, exports will increase.

Both the statements are true. Both the statements are false. Statement 1 is true and Statement 2 is false Statement 2 is true and Statement 1 is false

Statement 1 is true and Statement 2 is false

Suppose, One dollar = 70 rupees. Increase in foreign exchange rate means now one dollar = 140 rupees. Earlier, one commodity costing ₹ 70 was exported and American paid one dollar only. Now if one dollar = 140 rupees. Now, American will have to pay half dollar. So Indian goods got cheaper for Americans. So they will demand more Indian goods. As price falls so demand increase. Hence Indian exports will increase. When Indian currency appreciates means for every Indian good costing ₹ 1, the foreign will have to pay more dollars. So Indian goods get expensive and hence exports will fall and not rise.