Multiple Choice Questions on Other things remaining unchanged when in a country the price of foreign currency rises national inco........... for Economics ( 11th and 12th ) Preparation

National Income Accounting

Introductory Macro Economics Economics ( 11th and 12th )

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Indian Economy - Understanding the basics of Indian economic system

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Study Notes

    Other things remaining unchanged, when in a country the price of foreign currency rises, national income is:

    Likely to fall

    Incorrect Answer

    Likely to rise

    Correct Answer

    Likely to rise and fall both

    Incorrect Answer

    Not affected

    Incorrect Answer
    Explanation:

    Here’s how it shakes out:

    - When the price of foreign currency goes up, that just means your own currency is weaker. In other words, it takes more of your money to buy a dollar or a euro.

    - This makes imports more expensive for you. So, stuff coming from abroad costs more, which usually leads people to buy less from outside the country.

    - At the same time, your exports get cheaper for foreigners. So, people elsewhere might buy more of what your country makes.

    - But—and this is key—higher prices for imports can cause costs to rise at home, especially for things you need to import (like oil, machinery). That cost increase can slow down the economy.

    - All in all, in the short run, national income is more likely to dip, not rise, because higher import prices can hurt both consumers and producers.

    So, the right pick is:

    - Likely to fall


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