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11 December, 09:48

What does it mean to say that, at an exchange rate of 1 USD = 40 INR, the U. S. dollar is undervalued and the Indian rupee is overvalued ?

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  1. 11 December, 09:56
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    The US dollar is worth more value than INR.

    Explanation:

    The US dollar is worth more value than INR under flexible exchange rate system, quantity of dollar supplied exeed the quantity of dollar demanded. There are multiple factors which affect the valuation of currency. One of the factor is purchasing power parity, as it show the strength of domestic economy. Inflation is another factor affecting the currency of the nation, higher inflation rate lead the value of currency go down.
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