Question

Which of the following gives rise to a demand for foreign exchange?

Options

• Exports of goods and services to other countries

• Imports of goods and services from other countries

• Remittances received from abroad

• Foreign Direct Investment received from abroad

Answer 1

Imports of goods and services require payment in foreign currency, so they create demand for foreign exchange. Exports, remittances received, and investment inflows received from abroad are sources of supply, not demand.