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Explain the impact of rise in exchange rate on national income. |
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Answer» National income is generated by way of consumption expenditure, investment expenditure, government purchases and expenditure by foreigners on the country’s exports. A rise in foreign exchange rate makes home country’s goods cheaper to foreigners. As a result, demand for home country’s goods increases leading to increase in India’s exports. Further, a rise in foreign exchange rate makes home country’s currency cheaper which attracts foreigners and promotes tourism to home country. Due to these factors, there is a positive impact of rise in exchange rate on national income. |
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