Question : Assertion: Devaluation of Domestic currency refers to rise in National Income of domestic country.
Reason: Devaluation of Domestic currency refers to reduction in the value of domestic currency with respect to foreign currency, under fixed exchange rate system.
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: Assertion is false but Reason is true
Solution : The correct answer is d) Assertion is false but Reason is true.
Devaluation of a domestic currency refers to a deliberate decrease in the value of the currency relative to other currencies, typically under a fixed exchange rate system. This is done by a government or central bank to improve the competitiveness of domestic goods and services in international markets. It can make exports cheaper and imports more expensive.
However, the assertion that devaluation of domestic currency leads to a rise in national income is not necessarily true. While devaluation can potentially boost exports and improve the trade balance, its impact on national income depends on various factors such as the country's economic structure, external demand, and domestic policies. Devaluation alone does not guarantee an automatic increase in national income.
Therefore, the reason provided in the statement is true as it correctly defines devaluation, but the assertion that it leads to a rise in national income is false as it oversimplifies the relationship between devaluation and national income.
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 increase in imports of the nation are observed.
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: Appreciation of a country's currency can have a negative impact on its tourism industry.
Reason: A stronger currency makes traveling to the country more expensive for foreign tourists.
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.
Option 1: Both Assertion and Reason are true and correct explanation
Question : Assertion: Central banks play a significant role in managing and influencing foreign exchange rates.
Reason: Central banks can intervene in the foreign exchange market to stabilize or manipulate their country's currency value.
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