Increase in the value of domestic commodities in terms of foreign curr...
Explanation:
When the value of domestic commodities increases in terms of foreign currency, it is known as revaluation or appreciation. Let's understand the concepts of revaluation, devaluation, and appreciation in detail.
Revaluation:
Revaluation refers to an increase in the value of a domestic currency in terms of foreign currency. It occurs when the exchange rate between the domestic currency and foreign currency changes, and the domestic currency becomes stronger or more valuable. In this case, the value of domestic commodities in terms of foreign currency also increases. Revaluation can occur due to various factors such as increased demand for domestic currency, strong economic performance, or positive market sentiment.
Devaluation:
Devaluation, on the other hand, refers to a decrease in the value of a domestic currency in terms of foreign currency. It occurs when the exchange rate between the domestic currency and foreign currency changes, and the domestic currency becomes weaker or less valuable. In this case, the value of domestic commodities in terms of foreign currency decreases. Devaluation can happen due to factors such as weak economic performance, high inflation, or market forces.
Appreciation:
Appreciation is a broader term that refers to an increase in the value of an asset or currency. In the context of domestic commodities, appreciation means an increase in their value in terms of foreign currency. It can occur due to revaluation of the domestic currency or other factors such as increased demand for domestic commodities in the international market.
Conclusion:
Both revaluation and appreciation refer to an increase in the value of domestic commodities in terms of foreign currency. Revaluation specifically refers to an increase in the value of the domestic currency, while appreciation is a broader term that encompasses various factors leading to an increase in the value of domestic commodities. Therefore, the correct answer to the given question is option 'D' - either revaluation or appreciation.
Increase in the value of domestic commodities in terms of foreign curr...
When the value of domestic commodity increases, it indicates increase in the value of domestic currency. This situation could either be appreciation or revaluation depending upon the type of exchange rate.