Depreciation of currency means a ________.

fall in exchange value of a country by market forces

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reduction in external value/exchange value of currency by the Government

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reduction in external value / exchange value due to wear and tear

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all the three

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Solution

The correct option is A fall in exchange value of a country by market forces
When a country follows a floating exchange rate regime, it is possible for the currency to fall in value due to a fall in demand for the currency that can be caused for a variety of reasons like decline of demand for the country's exports or attractive investment opportunities abroad.

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Similar questions

Q18. Consider the following statements:

1. In the floating exchange rates, currency values are determined by central bank.

2. Currency depreciation is usually done by a nation’s central bank.

Which of the above statements are correct?

(a) How does depreciation of domestic currency affect the exports?

(b) How does Make in India project affect foreign exchange rate?

Price of one currency in relation to other countries in the international exchange market is known as:

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