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Questions
Differentiate between revaluation of currency and appreciation of the currency.
Distinguish between appreciation and revaluation of currency.
Distinguish Between
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Solution 1
Revaluation means a rise of domestic currency in relation to foreign currency in a fixed exchange rate whereas appreciation implies an increase in the external value of a currency.
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Solution 2
| Sr. No. | Basis | Appreciation of Currency | Revaluation of Currency |
| 1. | Meaning | Increase in the value of domestic currency due to market forces. | Increase in the value of domestic currency by government decision. |
| 2. | Exchange Rate System | Occurs under a flexible exchange rate system. | Happens under a fixed exchange rate system. |
| 3. | Cause | Caused by higher demand for the domestic currency in the forex market. | Caused by official policy or intervention by the central authority. |
| 4. | Example | ₹ 1 changes from 0.012 USD to 0.014 USD (market-driven). | Government fixes ₹ 1 = 0.014 USD instead of 0.012 USD (policy-driven). |
| 5. | Government Intervention |
No direct intervention; value rises due to economic conditions. | Direct intervention; value is officially increased. |
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Concepts of Appreciation
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