question_answer

Foreign exchange rate in India is on the rise recently. What impact is it likely to have on exports and how?

Answer:

A rise in the exchange rate say from 1 = Rs. 50 implies that domestic country s export to foreign countries have become cheaper because now foreigners can purchase Rs. 50 worth of goods for $1, as compared to the earlier situation where they could purchase only Rs. 40 worth of goods for $1. Thus, this raises the demand for exports.