Which of the following is a source of supply for foreign exchange?
Answer & explanation
Correct answer: option 2
Any transaction that involves receipts of foreign exchange leads to an increase in the supply of foreign exchange. The major sources of foreign exchange are:
- Exports of goods and services as it would result in inflow of foreign exchange
- Foreign tourists in India would bring in foreign currencies to convert it into Rupee, this will increase the supply of foreign exchange.
- Remittances by Indians working abroad, will increase the inflow of foreign currencies.
- FDI by MNC results in flow of foreign exchange, so if FDI is done in India, there would be increased flow of foreign currency.
- Purchase of shares by Foreign investors.