Wealth-Forum e-zine

Test your understanding of this topic

Q1.

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

(i) True

(ii) False

Q2.

Exchange rate is the future market price for which one currency can be exchanged for another.

(i) True

(ii) False

Q3.

Because of inflation

(a) Value of domestic currency appreciates

(b) Value of domestic currency depreciates

(d) None of the above

Q4.

India currently has the following exchange rate system :

(i) fixed exchange rate system

(ii) managed floating exchange rate system

(iii) freely flexible exchange rate system

Q5.

Inflation differentials between two countries cause which country’s currency to weaken :

(i) Country with higher relative inflation

(ii) Country with lower relative inflation