Correct Option: D

A relatively higher rate of inflation causing rise in prices of the goods in India as compared to those in the USA will make US goods relatively cheaper and the Indian goods expensive. This will lead to rise in imports of US goods into India and the reduction in Indian exports to the USA that will, in turn, cause the foreign exchange rate of dollar in terms of rupees to rise and the price of Indian rupee in terms of the dollar will fall. Thus, as a result of higher rate of inflation in India, the US dollar -will appreciate and the Indian rupee will depreciate.