ECONOMICS
FOREIGN CURRENCY MARKETS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
investment in the rest of the world
|
|
|
investment from rest of the world
|
|
|
Either A or B
|
|
|
None of the above
|
Detailed explanation-1: -Investment outflows and repayment of international loans are sources of demand for foreign currency.
Detailed explanation-2: -Two sources of demand for foreign exchange are: (i) Imports from rest of the world. (ii) Foreign investment across the world.
Detailed explanation-3: -Exchange rates of a currency can be either fixed or floating. Fixed exchange rate is determined by the central bank of the country while the floating rate is determined by the dynamics of market demand and supply.
Detailed explanation-4: -Foreign exchange is demanded for the purpose of: i Payments of international loans. ii Gifts and grants to rest of the world. iii Investment in rest of the world. iv Direct purchases abroad as well as imports from rest of the world.