Story 1

Vishesh: Hi Tanisha! When did you return from your trip to USA?
Tanisha: Oh hi Vishesh! I returned yesterday only.
Vishesh: Oh good.
Tanisha: Yeah (notices Vishesh’s new iPhone) ohh wow, when did you buy your new
phone?
Vishesh: Just last week, got it in the Diwali sale with 10% discount.
Tanisha: That’s great. I actually brought the same phone from New York.
Vishesh: Really, for how much?
Tanisha: 65k
Vishesh: No way, how much discount did you get?
Tanisha: No, it wasn’t on discount. I got in on MRP only. Why, for much did you buy
yours?
Vishesh: 80k
Tanisha: with 10% discount?
Vishesh: yes, but I don’t get it why this much difference when the phone is of the
same company and it is the same model?
Tanisha: Oh, it’s because of foreign exchange rate.
Vishesh: because of foreign exchange rate?
Tanisha: yeah, The rate at which one currency is exchanged for another is called
Foreign Exchange Rate.
In other words, the foreign exchange rate is the price of one currency stated in terms
of another currency. For example, right one, one U.S dollar exchanges for 82 Indian
rupees, so the rate of exchange is 1$ = Rs. 82 or 1 Rs = 1/82 or 0.01219 U.S. dollar.
Vishesh: oh I get it but what determines the foreign exchange rate? I mean it doesn’t
always remains the same, right. So what factors influence the rate?
Tanisha: Exchange rate is impacted by some factors which can be economic, political
or psychological as well. The economic factors that are known to cause variation in
foreign exchange rates are inflation, trade balances, government policies.
Political factors that can cause a change in the foreign exchange rate are political
unrest or instability in the country and any kind of political conflict.
Psychological factors that impact the forex rate is the psychology of the participants
involved in foreign exchange.
Vishesh: ohhh, so that’s what it is. I did not know that before. Next time, I will also
buy my phone from abroad and save myself some money. 
Tanisha: yeah, sure

Story 2

At the petrol station

Man 1: Hi, can you pls fill the tank of my car full.
Employee: Sure sir. Petrol or diesel?
Man 1: Petrol
Employee: Ok sir. (After filling the tank) Sir, your total is 6k. Would you pay with
cash, card or UPI. 
Man 1: 6k?!! There must be some mistake. Last week only I got my tank full for just
5k.
Employee: Yes sir, the rates of Petrol and diesel have been increased yesterday only
as per government’s order.
Man 1: but such a steep rise in price, that too suddenly without any prior notice. Why?
Employee: sir, how would I know. I am just a worker who is doing his job as I am told
to.
Man 2: (in the car next to Man 1’s) its because of currency depreciation.
Man 1: currency depreciation?
Man 2: yeah, It means the value of domestic currency is less than the value of foreign
currency and domestic currency is required in more number to buy the foreign
currency. It is caused because of (1) increase in demand, or (2) decrease in supply.
Man 1: but why is currency deflation happening right now?
Man 2: because of the russia-Ukraine war. 
Man 1: what does that have to do with the inflation in our country?
Man 2: Everything. India imports more than 80 per cent of its oil requirement from
Russia and due to the war, the oil prices throughout the world have soared. Therefore,
high fuel prices bring a jump in the inflation rate.  Consumers are feeling the bite as
the companies hike the oil prices since the war broke out between Russia and Ukraine.
Due to this, prices of diesel and petrol as well as vegetable oils become very
expensive and are burning pockets of the consumer. Because of the prevailing
situation, the global prices of crude oil has carried a big impact on the economy. India
imports 85% of crude oil, the prices of which has risen by almost 50% this year alone.
India is also the biggest importer of edible oil buying almost 60 % of its needs. The
price of palm, the countries most widely consumed-edible oil has been rose to 45%
this year. The suppliers of sunflower oil, which Ukraine and Russia produce in large
quantities has been disrupted.
Man 1: so is only our currency depreciated or others too?
Man 2: “Currencies such as the British pound, the Japanese yen and the Euro have
weakened more than the Indian rupee against the US dollar and therefore, the Indian
rupee has strengthened against these currencies in 2022,” the government said in the
Lok Sabha.
Man 1: so does this inflation does any good to our economy or is it just bringing it to
ruins?
Man 2: Yes, if you see from one side, there is only loss and the economy is taking a
large blow but the government said the depreciation of the currency is likely to
enhance the export competitiveness which in turn impacts the economy positively.
Man 1: oh, so at least something good is coming out of this situation. I just hope the
war gets over and things go back to normal. Man 2: yeah, me too.