ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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supply
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demand
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Either A or B
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None of the above
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Detailed explanation-1: -Imports of goods and services raises the demand of foreign exchange. It s a component of the demand of foreign exchange because payments for imports are made in foreign exchange only.
Detailed explanation-2: -An increase in demand for imported goods raises the supply for foreign exchange. Answer: False. Supply of foreign exchange will decrease in order to make the payment for imported goods.
Detailed explanation-3: -Ans. With the rise in foreign exchange rate in India, the demand for foreign currency increases. This rise in exchange rate implies depreciation in domestic currency. It encourages exports from a country and discourages imports from rest of the world.
Detailed explanation-4: -Increase in foreign exchange rate leads to rise in supply of foreign exchange.
Detailed explanation-5: -When a country’s exchange rate increases relative to another country’s, the price of its goods and services increases. Imports become cheaper. Ultimately, this can decrease that country’s exports and increase imports.