Question

The value of dollar increases from ₹ 85 a dollar to ₹ 88 a dollar. As a result of it, which of the following effects will take place?

Options

• Imports will rise and exports will fall.

• Imports will fall and exports will rise.

• Imports will remain the same and exports will rise.

• Both imports and exports will fall.

Answer 1

Imports will rise and exports will fall.

Explanation:

A rise in the dollar's price from ₹85 to ₹88 makes imports cheaper in rupee terms but makes Indian exports dearer in dollar terms. This tends to increase imports and reduce exports.