Consider the following statements 1 Depreciation of Rupee against currency of major trading partner ...........

Economic Affairs Foreign Trade - Trends and Policy

Consider the following statements:

1. Depreciation of Rupee against currency of major trading partner countries will decrease exports.

2. Appreciation of Rupee against currency of major trading partner countries will decrease exports.

3. Depreciation of rupee is inflationary in nature.

Which of the following statements is/ are correct?

1 only

1 and 3 only

2 and 3 only

3 only

1st and 2nd statements are contradictory. If statement 2nd is correct, 1st will be incorrect.

Currency depreciation is a fall in the value of a currency in terms of its exchange rate versus other currencies. Currency depreciation can occur due to factors such as economic fundamentals, interest rate differentials, political instability, or risk aversion among investors.
Currency depreciation is a fall in the value of a currency in a floating exchange rate system.
Economic fundamentals, interest rate differentials, political instability, or risk aversion can cause currency depreciation.
Orderly currency depreciation can increase a country’s export activity as its products and services become cheaper to buy.
The Federal Reserve's quantitative easing programs used to stimulate the economy in the aftermath of the 2007-2008 financial crisis caused U.S. dollar depreciation.
Currency depreciation in one country can spread to other countries.