Question : When a country's currency is undervalued, it means that:
Option 1: Its value increases relative to other currencies
Option 2: Its value decreases relative to other currencies
Option 3: Its value remains the same as other currencies
Option 4: Its value cannot be determined accurately
Correct Answer: Its value decreases relative to other currencies
Solution : The correct answer is b) Its value decreases relative to other currencies
When a country's currency is undervalued, it means that its value is lower compared to other currencies. In other words, it takes more units of the undervalued currency to exchange for a unit of another currency. This can happen due to various factors, such as market forces, government policies, or economic imbalances. An undervalued currency can make a country's exports more competitive in the international market, as they become relatively cheaper for foreign buyers. However, it also makes imports more expensive, which can impact domestic consumers and businesses.
Question : When a country's currency appreciates, it means that:
Option 1: Its value increases relative to other currencies.
Option 2: Its value decreases relative to other currencies.
Option 3: Its value remains constant.
Option 4: None of the above.
Option 1: Its value decreases relative to other currencies
Option 2: Its value increases relative to other currencies
Option 3: It remains stable against other currencies
Option 4: It has no impact on other currencies
Question : When a country's currency depreciates, it means that:
Option 1: Its value decreases relative to other currencies.
Option 2: Its value increases relative to other currencies.
Question : The currency of one country is said to appreciate when its value ________ in relation to another currency.
Option 1: increases
Option 2: decreases
Option 3: stabilizes
Option 4: remains constant
Question : What is the term used to describe a situation where a country's currency is not freely tradable or convertible into other currencies?
Option 1: Convertible currency
Option 2: Non-convertible currency
Option 3: Reserve currency
Option 4: Intervention currency
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