Question

Consider the following statements: The price of any currency in international market is decided by the

1. World Bank

2. demand for goods/services provided by the country concerned

3. stability of the government of the concerned country

4. economic potential of the country in question

Which of the statements given above are correct?

(a) 1, 2, 3 and 4 (b) 2 and 3 only (c) 3 and 4 only (d) 1 and 4 only

Answer 1

(b) Price of any currency in international market is determined by the demand for goods/services produced by the country. If the demand for the product is high then the currency would be strong. The current depreciation of the Indian Rupee is due to rising oil prices. The stability of the government of the concerned country has no role to play in determining the prices of a currency.