Multiple Choice Questions on With reference to Nominal Effective Exchange Rate NEER consider following statements The NEER of the........... for UPSC Civil Services Examination (General Studies) Preparation

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Multiple Choice Questions

With reference to Nominal Effective Exchange Rate NEER consider following statements The NEER of the...........

Economic Affairs Balance of Payments
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    With reference to Nominal Effective Exchange Rate (NEER), consider following statements

    1. The NEER of the rupee is a weighted average of bilateral exchange rates between the rupee and a basket of foreign currencies.
    2. A decrease in NEER index denotes depreciation in rupee’s value.

    Select the correct statement.

    1 only

    Incorrect Answer

    2 only

    Incorrect Answer

    Both

    Correct Answer

    None

    Incorrect Answer
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    Explanation:
    • The Reserve Bank of India tabulates the rupee’s Nominal Effective Exchange Rate (NEER) in relation to the currencies of 36 trading partner countries. It is calculated as a weighted average of bilateral exchange rates of rupee against foreign currencies. Hence statement 1st is correct.
    • A decrease in NEER index denotes depreciation in rupee’s value whereas an increase reflects appreciation. Hence statement 2nd is correct.

    By: Shubham Tiwari
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