Question : A decrease in a country's exports is likely to result in:

Option 1: Appreciation of its currency
 

Option 2: Depreciation of its currency
 

Option 3: No impact on its currency

Option 4: A fixed exchange rate

Question : A decrease in interest rates in a country is likely to result in:

Option 1: Appreciation of the domestic currency
 

Option 2: Depreciation of the domestic currency
 

Option 3: No impact on the exchange rate

Option 4: Unpredictable fluctuations in the exchange rate

Question : Depreciation and appreciation are the part of which exchange rate system?
 

Option 1: Fixed exchange rate system
 

Option 2: Flexible exchange rate system
 

Option 3: Managed floating rate system
 

Option 4: None of the above.
 

Question : A country with a trade deficit is likely to experience ________ pressure on its currency.

Option 1: upward
 

Option 2: downward
 

Option 3: no

Option 4: mixed

Question : Assertion: Appreciation of a country's currency can lead to a decrease in its inflation rate.

Reason: A stronger currency reduces the cost of imported goods, thereby lowering inflationary pressures.

Option 1: True, as imported goods become relatively cheaper, reducing inflationary pressures.
 

Option 2: True, only if the country has a high dependence on imported goods.
  

Option 3: False, as currency appreciation has no impact on a country's inflation rate.

Option 4: False, as currency appreciation leads to higher inflation due to increased purchasing power.