How can currency depreciation stimulate an increase in net exports? 1. By reducing export costs 2. By reducing import prices Select the answer using the code given below:

CDS 2025 PYQ with Answer — How can currency depreciation stimulate an increase in net exports? 1…

2025 · Q116

How can currency depreciation stimulate an increase in net exports?

1By reducing export costs
2By reducing import prices Select the answer using the code given below:

General KnowledgeIndian Economy

A1 only
B2 only
CBoth 1 and 2
DNeither 1 nor 2

Explanation

Statement 1 alone is correct. Depreciation of the rupee makes Indian goods cheaper in foreign-currency terms, reducing their effective export prices and stimulating exports. But depreciation RAISES import prices in domestic-currency terms, so statement 2 is false — the opposite of what it claims.