Question : Assertion: In 1991, the Indian government revalued the domestic currency.
Reason: This step was taken by the government to increase the inflow of foreign exchange.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Assertion is false, but the reason is true.
Correct Answer: Assertion is false, but the reason is true.
Solution : The correct answer is (d) Assertion is false, but the reason is true.
The assertion "In 1991, the Indian government revalued the domestic currency" is false. In fact, in 1991, the Indian government devalued the domestic currency, not revalued it. Devaluation refers to a deliberate decrease in the value of a currency relative to other currencies, making the domestic currency weaker in comparison.
The reason provided, stating that the step was taken to increase the inflow of foreign exchange, is not applicable in this case because the assertion itself is incorrect. Devaluation is often done to improve the competitiveness of domestic industries by making exports more affordable and imports relatively more expensive. It can also help address trade imbalances and boost economic growth.
Therefore, the assertion is false, but the reason is true.
Question : Assertion: Devaluation of the Indian rupee in 1991 resulted in the inflow of foreign exchange.
Reason: Devaluation of the Indian rupee was a step to get more foreign investments.
Question : Assertion: Devaluation of Domestic currency refers to rise in National Income of domestic country.
Reason: Devaluation of Domestic currency refers to reduction in the value of domestic currency with respect to foreign currency, under fixed exchange rate system.
Option 1:
Both Assertion and Reason are true and correct explanation
Option 2: Both Assertion and Reason are true and incorrect explanation
Option 3: Assertion is true but Reason is false
Option 4: Assertion is false but Reason is true
Question : Assertion: A surplus in the capital account can lead to an appreciation of the domestic currency.
Reason: Higher capital inflows increase the demand for the domestic currency, strengthening its value.
Option 1: Both Assertion and Reason are true and correct explanation
Question : Assertion: Trade reforms in the 1991 economic policy aimed to reduce import tariffs.
Reason: Lower import tariffs can stimulate domestic industries and enhance competitiveness.
Question : Assertion: A surplus in the current account leads to an increase in foreign exchange reserves.
Reason: Surplus in the current account implies that the inflow of foreign exchange exceeds the outflow.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile