Q. Consider the following statements:
1.A trade deficit occurs when a country’s exports exceed its imports.
2.A persistent trade deficit weakens the domestic currency.
Which of the statement(s) given above is/are correct?
Answer: B
Notes:
Explanations –
Statement 1 is incorrect. A trade deficit occurs when a country’s imports exceed its exports.
Statement 2 is correct. A persistent trade deficit leads to a higher demand for foreign currencies to pay for imports, resulting in downward pressure on the value of the domestic currency.
Source: The Hindu
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