The correct answer is Option (1) → (A)-(III), (B)-(IV), (C)-(I), (D)-(II)
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(A) Exchange Rate: The exchange rate represents the price of one currency in terms of another. It reflects the external value of the domestic currency. Therefore, (A) matches with (III) - External value of the domestic currency.
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(B) Gold standard system of exchange rate: This was a historical monetary system where a country's currency or paper money had a value directly linked to gold. It was a classic example of a fixed exchange rate system. Therefore, (B) matches with (IV) - An old variant of fixed exchange rate.
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(C) Par rate of exchange: In a fixed exchange rate system, the par rate is the official rate at which one currency can be exchanged for another. It often implies a situation where the supply of foreign exchange equals the demand for foreign currency to maintain the fixed rate. Therefore, (C) matches with (I) - Supply of foreign exchange = Demand of foreign currency.
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(D) Currency Depreciation: This occurs when the value of a country's currency falls relative to one or more foreign currencies. It means the domestic currency loses its value in relation to a foreign currency. Therefore, (D) matches with (II) - Domestic currency loses its value in relation to a foreign currency.
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