Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The flexible exchange rate is 50 Indian rupees per dollar.
-Refer to the scenario above.If the government of India wants to repay a lower sum of money to the United States,it should ________ in the foreign exchange market.

Question

Quizplus · Accepted Answer

To repay a lower sum of money, India needs to buy fewer dollars from the United States. This can be done by buying dollars in exchange for rupees in the foreign exchange market. By buying more dollars, India reduces the amount of rupees needed to repay the debt.

Scenario: Suppose India Borrows $10,000 from the United States at the Beginning