Economic Awareness - Sectors of Indian Economy
If the Indian Rupee appreciates against the US Dollar, what is the likely impact on the trade balance?
If the Indian Rupee appreciates against the US Dollar, what is the likely impact on the trade balance?
medium Q14 of 15
Step-by-Step Solution
Step 1: Understand appreciation effects
Appreciation makes exports expensive and imports cheaper.Step 2: Analyze trade balance impact
Expensive exports reduce export volume; cheaper imports increase import volume, worsening trade balance.Final Answer:
Trade balance worsens due to expensive exports and cheaper imports → Option BQuick Check:
Currency appreciation = trade balance worsens ✅
Quick Trick: Stronger currency can hurt trade balance.
Common Mistakes:
MISTAKES- Assuming appreciation always improves trade balance.
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