Question

Suppose the exchange rate was \[\ce{$}\]1 = ₹ 80 and later changed to \[\ce{$}\]1 = ₹ 92. What will be its effect on the following?

Import of wheat by India from the USA

Answer 1

The depreciation of the domestic currency (from ₹ 80 to ₹ 92 per dollar) increases the cost of imports from the USA for Indian buyers in terms of Indian rupees. As a result, India's wheat imports from the USA may decline.