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| 1. |
A British company has ordered readymade garments from an Indian company. What will be the impact on their total import expenditure if foreign exchange rate increases? |
| Answer» SOLUTION :It will reduce the total import expenditure of British COMPANY because INCREASE in the foreign EXCHANGE rate (here British POUND) will raise the purchasing power of the company. It means that same amount of goods can be purchased from India with lesser amount of British pounds implying fall in total import expenditure. | |