If US dollar becomes costlier in terms of the Indian rupee, it is good as well as bad for the domestic growth. How?

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Solution

(i) It is good because purchasing power of US dollar in the Indian market increases. Accordingly, demand for the domestic goods is expected to rise. A rise in exports is a key factor in domestic growth.

(ii) It is bad because imports of essential capital goods (critical for growth) become expensive.

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