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What will be the most likely impact on the national income when in a country the price of foreign currency rises, keeping other things unchanged?
- a)Likely to rise
- b)Likely to fall
- c)Likely to rise and fall both
- d)Not affected
Correct answer is option 'A'. Can you explain this answer?
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What will be the most likely impact on the national income when in a c...
Impact of Rising Foreign Currency Price on National Income
When the price of foreign currency rises, the most likely impact on the national income of a country is that it will rise. This can be explained through the following points:
1. Increase in Exports: When the price of foreign currency rises, the value of the domestic currency falls. This makes exports cheaper and more attractive, leading to an increase in exports. As a result, the country's foreign exchange earnings increase, which contributes to the national income.
2. Decrease in Imports: When the domestic currency weakens, the cost of imports increases. This makes imports more expensive and less attractive, leading to a decrease in imports. As a result, the country's foreign exchange outflow decreases, which contributes to the national income.
3. Boost in Tourism: A weaker domestic currency makes the country a more affordable destination for foreign tourists. This leads to an increase in tourism, which contributes to the national income.
4. Increase in Foreign Investment: A weaker domestic currency makes the country's assets cheaper for foreign investors. This leads to an increase in foreign investment, which contributes to the national income.
In conclusion, a rise in the price of foreign currency can have a positive impact on a country's national income. It can lead to an increase in exports, a decrease in imports, a boost in tourism, and an increase in foreign investment.
When the price of foreign currency rises, the most likely impact on the national income of a country is that it will rise. This can be explained through the following points:
1. Increase in Exports: When the price of foreign currency rises, the value of the domestic currency falls. This makes exports cheaper and more attractive, leading to an increase in exports. As a result, the country's foreign exchange earnings increase, which contributes to the national income.
2. Decrease in Imports: When the domestic currency weakens, the cost of imports increases. This makes imports more expensive and less attractive, leading to a decrease in imports. As a result, the country's foreign exchange outflow decreases, which contributes to the national income.
3. Boost in Tourism: A weaker domestic currency makes the country a more affordable destination for foreign tourists. This leads to an increase in tourism, which contributes to the national income.
4. Increase in Foreign Investment: A weaker domestic currency makes the country's assets cheaper for foreign investors. This leads to an increase in foreign investment, which contributes to the national income.
In conclusion, a rise in the price of foreign currency can have a positive impact on a country's national income. It can lead to an increase in exports, a decrease in imports, a boost in tourism, and an increase in foreign investment.
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What will be the most likely impact on the national income when in a c...
ise in exchange rate leads to depreciation of domestic currency. Depreciation of currency encourages exports and inflow of foreign exchange. This process is likely to have a positive impact on the national income of the country.
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What will be the most likely impact on the national income when in a country the price of foreign currency rises, keeping other things unchanged?a)Likely to riseb)Likely to fallc)Likely to rise and fall bothd)Not affectedCorrect answer is option 'A'. Can you explain this answer?
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What will be the most likely impact on the national income when in a country the price of foreign currency rises, keeping other things unchanged?a)Likely to riseb)Likely to fallc)Likely to rise and fall bothd)Not affectedCorrect answer is option 'A'. Can you explain this answer? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about What will be the most likely impact on the national income when in a country the price of foreign currency rises, keeping other things unchanged?a)Likely to riseb)Likely to fallc)Likely to rise and fall bothd)Not affectedCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What will be the most likely impact on the national income when in a country the price of foreign currency rises, keeping other things unchanged?a)Likely to riseb)Likely to fallc)Likely to rise and fall bothd)Not affectedCorrect answer is option 'A'. Can you explain this answer?.
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