Question : Assertion: Appreciation of a country's currency can lead to a decrease in its inflation rate.

Reason: A stronger currency reduces the cost of imported goods, thereby lowering inflationary pressures.

Option 1: True, as imported goods become relatively cheaper, reducing inflationary pressures.
 

Option 2: True, only if the country has a high dependence on imported goods.
  

Option 3: False, as currency appreciation has no impact on a country's inflation rate.

Option 4: False, as currency appreciation leads to higher inflation due to increased purchasing power.

Question : Which of the following is a potential drawback of currency appreciation for an export-driven economy?

Option 1: Increased purchasing power of domestic consumers.
 

Option 2: Decreased competitiveness of exported goods.
 

Option 3: Higher import costs.

Option 4: All of the above.

Question : A decrease in the real exchange rate implies:

Option 1: Increased competitiveness of domestic goods in the international market.
 

Option 2: Reduced competitiveness of domestic goods in the international market.
 

Option 3: Increased inflation in the domestic economy.

Option 4: Reduced inflation in the domestic economy.

Question : A decrease in a country's exports is likely to result in:

Option 1: Appreciation of its currency
 

Option 2: Depreciation of its currency
 

Option 3: No impact on its currency

Option 4: A fixed exchange rate

Question : Which of the following factors can contribute to the appreciation of a country's currency?

Option 1: High interest rates.
   

Option 2: Strong economic performance.
   

Option 3: Increased foreign investment.

Option 4: All of the above.