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Question
The foreign exchange rate in India is on the rise recently. What impact is it likely to have on exports and how?
Solution
When there is an increase in the exchange rate in India, there will be an increase in the demand for export of goods and services in India. For example, if the exchange rate for $1 = Rs 50 increases to $1 = Rs 56, then the export of goods to foreign countries will become cheaper. So, the goods worth Rs 56 for $1 can be exported, and hence, there is an increase in the demand for exports.
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