Question
Which of the following statements is correct?
Answer: Option A
Answer: (a)
Suppose (Nominal) exchange rate is $1 = Rs. 60
Now if an Indian exporter exported a particular commodity (1 unit) in the international market whose price is $8,
then he will get $8 and after conversion in India, he will get ultimately Rs. 480.
But if the rupee is undervalued (means less valued) i.e. USD 1 = Rs. 64 then he can sell his product in the international market at a lesser price of $7.5 and can earn the same Rs. 480 after conversion.
(When a country devalues its currency, then exporters are able to sell their product in the international market at a lesser price without compromising their earnings.)
So, we also say that exporters become more competitive.
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Answer: (a)
Suppose (Nominal) exchange rate is $1 = Rs. 60
Now if an Indian exporter exported a particular commodity (1 unit) in the international market whose price is $8,
then he will get $8 and after conversion in India, he will get ultimately Rs. 480.
But if the rupee is undervalued (means less valued) i.e. USD 1 = Rs. 64 then he can sell his product in the international market at a lesser price of $7.5 and can earn the same Rs. 480 after conversion.
(When a country devalues its currency, then exporters are able to sell their product in the international market at a lesser price without compromising their earnings.)
So, we also say that exporters become more competitive.
Was this answer helpful ?
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