 
         
        McqMate
| Q. | As a result of higher rate of inflation in India, the U.S. dollar will - | 
| A. | Depreciate | 
| B. | Constant | 
| C. | Negligible | 
| D. | Appreciate | 
| Answer» D. Appreciate | |
| Explanation: A   relatively   higher   rate   of inflation causing rise in prices of the goods in India as compared to those in the USA will make US  goods  relatively  cheaper  and  the  Indian goods expensive. This will lead to rise in imports of  US  goods  into  India  and  the  reduction  in Indian  exports  to  the  USA  that  will,  in  turn, cause  the  foreign  exchange  rate  of  dollar  in terms of rupees to rise and the price of Indian rupee in terms of dollar will fall. Thus, as a result of higher rate of inflation in India, the US dollar -will   appreciate   and   the   Indian   rupee   will depreciate. | |
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