ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The demand curve for foreign exchange is downward-sloping. The higher the exchange rate, the higher the higher the price of foreign goods in the domestic currency. The higher price leads to a decrease in quantity demanded of the foreign good, and therefore the foreign currency.

Detailed explanation-2: -Demand curve is downward sloping (due to the inverse relationship between exchange rate and the demand for foreign exchange). Was this answer helpful?

Detailed explanation-3: -Demand Curve of foreign exchange There is an inverse relationship between the rate of foreign exchange and demand for foreign exchange. It means the higher the rate, the lesser will be the demand for foreign exchange and vice-versa. Due to this reason, the demand curve slopes downwards.

Detailed explanation-4: -Higher the exchange rate higher will be the export and supply of foreign exchange. Thus, the supply curve of foreign currency is upward sloping. Also when the foreign exchange rate rises, more foreigners will be attracted to the domestic country. This will further increase the supply of foreign currency.

Detailed explanation-5: -Answer: The demand for foreign currency rises in the following situations: When price of a foreign currency falls, imports from that, foreign, country become cheaper. So, imports increase and hence, the demand for foreign currency rises.