Advertisements
Advertisements
Question
Explain the relationship between foreign exchange rate and demand for foreign exchange.
Explain
Advertisements
Solution
| Situation | Effect on Foreign Exchange Rate | Impact on Demand for Foreign Exchange |
| Domestic currency depreciates (weaker) | Exchange rate rises (foreign currency becomes costlier) | Demand for foreign exchange falls |
| Domestic currency appreciates (stronger) | Exchange rate falls (foreign currency becomes cheaper) | Demand for foreign exchange rises |
shaalaa.com
Is there an error in this question or solution?
