Question:
What does a strong Rupee (against the dollar) generally mean for India?
What does a strong Rupee (against the dollar) generally mean for India?
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Tie exchange-rate \textbf{appreciation} to \textbf{excess demand for domestic currency}—often via BoP surplus.
Updated On: Aug 12, 2025
- There is a Balance of Payments surplus
- Indian economy is globally respected
- It is a sign of economic buoyancy
- Income from exports is falling
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The Correct Option is A
Solution and Explanation
Mechanics: A currency appreciates when demand for it rises relative to supply. Persistent {current/overall BoP surplus} (via exports, remittances, capital inflows) pushes up the Rupee’s value.
Inference: While (c) may sometimes accompany appreciation, the direct macro explanation is (a). Option (d) describes one {effect} of a stronger Rupee (export earnings in INR can be pressured), not the cause.
Inference: While (c) may sometimes accompany appreciation, the direct macro explanation is (a). Option (d) describes one {effect} of a stronger Rupee (export earnings in INR can be pressured), not the cause.
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