25 MAY,2023.
The fundamental value of the rupee (PG 7)(GS 3)
25 MAY,2023.
•The first thing that comes to mind when speaking of the value of a currency is the exchange rate it commands in international transactions.
• For instance, we may ask how many cents is the rupee worth.
•Another is its purchasing power within an economy, i.e., whether it can buy the same basket of goods over time.
•Inflation erodes the value of a currency over time. But there is a more fundamental sense in which the value of a currency is to be understood, and it has nothing to do with prices.
• It has to do with the confidence that citizens have in its continued acceptance as a medium of exchange and store of value.
•This confidence is based on the trust that they repose in their monetary authority, which is the central bank.