Question : Assertion: A depreciating currency can help boost exports.
Reason: A lower currency value makes exports cheaper for foreign buyers, increasing their demand.
Option 1: Both Assertion and Reason are true and correct explanation
Option 2: Both Assertion and Reason are true and incorrect explanation
Option 3: Assertion is true but Reason is false
Option 4: Assertion is false but Reason is true
Correct Answer: Both Assertion and Reason are true and correct explanation
Solution : The correct answer is (a) Both the Assertion and the Reason are true and provide a correct explanation.
The Assertion states that a depreciating currency can help boost exports, which is true. When a country's currency depreciates, it means that the value of the currency has decreased relative to other currencies. This makes the country's exports relatively cheaper for foreign buyers. As a result, foreign buyers may find the exports more affordable and may increase their demand for them, leading to a boost in export volumes.
The Reason states that a lower currency value makes exports cheaper for foreign buyers, increasing their demand, which is also true and supports the Assertion. When the currency depreciates, it takes fewer units of foreign currency to purchase a unit of the domestic currency. This effectively reduces the price of exports in foreign currency terms, making them more attractive and affordable to foreign buyers.
Therefore, Both Assertion and Reason are true and provide a correct explanation.
Question : Assertion: Depreciation of a country's currency can help boost its export-oriented industries.
Reason: A weaker currency makes a country's exports more affordable and competitive in the global market.
Question : Assertion: An increase in the exchange rate leads to a decrease in exports.
Reason: A higher exchange rate makes exports relatively more expensive, reducing their competitiveness.
Question : Assertion: A deficit in the current account can put pressure on the domestic currency to depreciate.
Reason: A current account deficit means more foreign currency is leaving the country, reducing its value.
Question : Assertion: A surplus in the capital account can lead to an appreciation of the domestic currency.
Reason: Higher capital inflows increase the demand for the domestic currency, strengthening its value.
Question : Assertion: Appreciation and Revaluation of Domestic Currency with respect to foreign currency are one and the same thing.
Reason: Appreciation and Revaluation of domestic currency make the domestic goods relatively expensive. As a result, decrease in exports and
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