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  9. Q5

JKPSC KAS 2025 · Question 5 of 100

Consider the following statements: Assertion (A): Currency depreciation always leads to an improvement in the trade balance. Reason (R): The real exchange rate adjusts the nominal exchange rate for differences in Price levels (inflation) between countries. Select the correct answer:

Indian Economy

  1. ABoth A and R are true, and R is the correct explanation of A
  2. BBoth A and R are true, but R is not the correct explanation of A
  3. CA is true, but R is false
  4. DA is false, but R is trueCorrect

Answer: D. A is false, but R is true

Explanation

Assertion (A) states that currency depreciation always leads to an improvement in the trade balance. Currency depreciation makes a country's exports cheaper for foreign buyers and imports more expensive for domestic buyers.

Source: JKPSC KAS Prelims 2025 GS via prepp.in

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