When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer?

Revaluation in a Fixed Exchange Rate System

Revaluation occurs when the government decreases the exchange rate in a fixed exchange rate system, making the domestic currency costlier. This can have several implications on the economy and trade relationships.

Effects of Revaluation

- Appreciation: Revaluation leads to an appreciation of the domestic currency. This means that the domestic currency becomes stronger in comparison to other currencies.
- Impact on Imports: A revaluation makes imports cheaper for domestic consumers but can hurt domestic producers who rely on exports.
- Impact on Exports: The costlier domestic currency makes exports more expensive for foreign buyers, potentially reducing demand for domestic products in international markets.
- Trade Imbalance: Revaluation can worsen the trade balance as exports decrease and imports increase due to the changes in currency value.
- Competitiveness: Domestic producers may struggle to compete with foreign producers who offer lower prices due to their weaker currencies.

Reasons for Revaluation

Governments may choose to revalue their currency for various reasons, such as:
- To control inflation by reducing the cost of imports
- To attract foreign investment by making domestic assets more attractive
- To build foreign exchange reserves by increasing the value of exports

In conclusion, revaluation in a fixed exchange rate system involves the government decreasing the exchange rate to make the domestic currency costlier. This can have significant impacts on the economy, trade relationships, and competitiveness of domestic producers.

View all answers Start learning for free

Explore Courses for Humanities/Arts exam

Similar Humanities/Arts Doubts

Directions: Read the passage carefully and answer the questions.The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their Gross Domestic Product (GDP). The achievement was known as the "Asian Economic Miracle". However, a significant risk was embedded in the achievement.The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy.In the mid-1900s, following the recovery of the U.S. from a recession, the Federal Reserve raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market leading to an appreciation of the U.S. dollar.The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis.Thus Thai Government first ran out of foreign currency to supports its exchange rate, forcing it to float the baht.The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.Q. Identify the most unlikely reason or appreciation of the US dollar.

View answer

Directions: Read the passage carefully and answer the questions.The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their Gross Domestic Product (GDP). The achievement was known as the "Asian Economic Miracle". However, a significant risk was embedded in the achievement.The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy.In the mid-1900s, following the recovery of the U.S. from a recession, the Federal Reserve raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market leading to an appreciation of the U.S. dollar.The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis.Thus Thai Government first ran out of foreign currency to supports its exchange rate, forcing it to float the baht.The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.Q. The likely reason for investor s from Western Countries pulling out their investments from these nations was

View answer

Directions: Read the passage carefully and answer the questions.The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their Gross Domestic Product (GDP). The achievement was known as the "Asian Economic Miracle". However, a significant risk was embedded in the achievement.The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy.In the mid-1900s, following the recovery of the U.S. from a recession, the Federal Reserve raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market leading to an appreciation of the U.S. dollar.The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis.Thus Thai Government first ran out of foreign currency to supports its exchange rate, forcing it to float the baht.The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.Q. The likely impact of an appreciation of the US dollar, on imports of the South East Asian Countries from the U.S. would be

View answer

Directions: Read the passage carefully and answer the questions.The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their Gross Domestic Product (GDP). The achievement was known as the "Asian Economic Miracle". However, a significant risk was embedded in the achievement.The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy.In the mid-1900s, following the recovery of the U.S. from a recession, the Federal Reserve raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market leading to an appreciation of the U.S. dollar.The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis.Thus Thai Government first ran out of foreign currency to supports its exchange rate, forcing it to float the baht.The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.Q. The likely im pact of a depreciation of the dom estic currencies of the South East Asian Countries on exports to the US would be

View answer

Rathi Udyog, made a profit of 72,000 after changing depreciation of Rs. 17,000 on fixed assets and paid Rs. 10,000 as interim dividend. The goodwill amortized was Rs. 12,000 and profit (Gain) on sale of furniture was Rs. 2,500.The other informations were: Trade Payable showed an increase of Rs. 7,000.Outstanding expenses showed a decrease of Rs. 5,000.Accrued Income showed an increase of Rs. 8,000.Trade payable showed a decrease of Rs. 10,000.Inventories showed a decrease of Rs. 3,000.On the basis of above information answer the following questions.Q. We add depreciation in order to find out operating profit before working capital changes

View answer

Top Courses for Humanities/ArtsView all

Chapter Notes for Humanities

NCERT Books & Solutions for Humanities

Online MCQ Tests for Humanities

Short & Long Question Answers for Humanities

Geography Class 11

Top Courses for Humanities/Arts

View all

When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer?

Share with a Friend

Answer this doubt

Question Description
When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer? for Humanities/Arts 2025 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer?.

Solutions for When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for Humanities/Arts. Download more important topics, notes, lectures and mock test series for Humanities/Arts Exam by signing up for free.

Here you can find the meaning of When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice When the government decreases the exchanges rate,there by making domestic currency costlier in a fixed exchange rate system, it is known as:a)Appreciationb)Revaluationc)Depreciationd)DevaluationCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice Humanities/Arts tests.

Explore Courses for Humanities/Arts exam