{"id":1669,"date":"2024-03-28T17:45:33","date_gmt":"2024-03-28T12:15:33","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1669"},"modified":"2024-04-03T07:19:32","modified_gmt":"2024-04-03T01:49:32","slug":"q-with-reference-to-the-indian-economy-consider-the-following-statements","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-with-reference-to-the-indian-economy-consider-the-following-statements","title":{"rendered":"Q. With reference to the Indian economy, consider the following statements:"},"content":{"rendered":"\n
    \n
  1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.<\/li>\n\n\n\n
  2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.<\/strong><\/li>\n\n\n\n
  3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.<\/li>\n<\/ol>\n\n\n\n

    Which of the above statements are correct?<\/p>\n\n\n\n

      \n
    • 1 and 2 only<\/li>\n\n\n\n
    • 2 and 3 only<\/li>\n\n\n\n
    • 1 and 3 only<\/li>\n\n\n\n
    • 1, 2 and 3<\/li>\n<\/ul>\n\n\n\n
      \n

      Answer: (c) 1 and 3 only<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      Notes:<\/h5>\n\n\n\n
        \n
      • The indices of Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) are used as indicators of external competitiveness.<\/li>\n\n\n\n
      • NEER is the weighted average of bilateral nominal exchange rates of the home currency in terms of foreign currencies. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.<\/li>\n\n\n\n
      • REER is the weighted average of nominal exchange rates adjusted for relative price differential between the domestic and foreign countries.<\/li>\n\n\n\n
      • An increase in a nation\u2019s REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper. Means, it is losing its trade competitiveness.<\/strong><\/li>\n\n\n\n
      • A real effective exchange rate (REER) is the NEER adjusted by relative prices or costs, typically captured in inflation differentials between the home economy and trading partners. A nation\u2019s nominal effective exchange rate (NEER) when adjusted for inflation in the home country, equals its real effective exchange rate (REER).<\/strong> Higher the inflation higher will be divergence (difference between) NEER and REER.<\/strong><\/li>\n\n\n\n
      • NEER does not account for changes in inflation rates, which can distort its measurement of a country\u2019s currency strength. REER, on the other hand, adjusts for differences in inflation rates between countries, providing a more accurate picture of a country\u2019s competitiveness.<\/li>\n\n\n\n
      • NEER is useful for short-term analysis of a country\u2019s currency movements, while REER is useful for long-term analysis of a country\u2019s competitiveness and trade balance. REER provides a more comprehensive view of a country\u2019s economic performance by taking into account the impact of inflation on trade.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

        Which of the above statements are correct? Answer: (c) 1 and 3 only Notes:<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[51],"class_list":["post-1669","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-51"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":51,"label":"2022"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1669"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1669\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1669"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}