Statement 1 Foreign investment may affect a country 39 s export performance nbs...........

Indian Economy External Sector

Statement (1): Foreign investment may affect a country's export performance.

Statement (II): Inflow of foreign exchange may cause appreciation of local currency leading to a rise in the price of export commodities.

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EPFO APFC (2015)

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Both Statement (I) and Statement (II) are individually true and Statement (II) is the correct explanation of Statement (1)

Both Statement (I) and Statement (II) are individually true but Statement (II) is not the correct explanation of Statement (1)

Statement (I) is true but Statement (II) is false

Statement (I) is false but Statement (II) is true

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Explanation:

- Statement (1): Foreign investment may affect a country's export performance.

- True. Foreign investment can influence export performance by impacting production capacity, technology exchange, and competitiveness.

- Statement (II): Inflow of foreign exchange may cause appreciation of local currency leading to a rise in the price of export commodities.

- True. An increase in foreign exchange inflow can appreciate the local currency, making exports more expensive and potentially reducing competitiveness.

- Explanation:

- Statement (II) explains one potential mechanism by which foreign investment, through currency appreciation, can affect export performance.

The correct option is Option 1: Both Statement (I) and Statement (II) are individually true and Statement (II) is the correct explanation of Statement (1).