Read the following statements - Assertion (A) and Reason (R)carefully and choose the correct alternative given below:
Assertion (A) :Appreciation of Indian currency implies strengthening of Indian rupee.
Reason (R):Appreciation of domestic currency encourages exports by India to USA .

 Assertion (A) is true but Reason (R ) is false

Option 2: Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Assertion (A) states that appreciation of the Indian currency implies strengthening of the Indian rupee. This statement is true. Appreciation of a currency means an increase in its value relative to other currencies. Therefore, when the Indian currency appreciates, it indeed strengthens against other currencies.

Reason (R) states that appreciation of the domestic currency encourages exports by India to the USA. This statement is false. In a flexible exchange rate regime, when the price of domestic currency (rupees) in terms of foreign currency (dollars) increases, it is called Appreciation of the domestic currency (rupees) in terms of foreign currency (dollars). This means that the value of rupees relative to dollar has risen and we need to pay fewer rupees in exchange for one dollar. This increases the price of domestic goods for foreign buyers and thus exports become expensive. Thus, appreciation in rupee adversely affects the exports from India.