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 gold jewellery by the USA from India

Answer 1

The depreciation of the domestic currency (from ₹ 80 to ₹ 92 per dollar) reduces the cost of imports from India for American buyers in USD. As a result, the USA may expand its imports of gold jewellery from India.