Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Open Economy Macro Economics

Question:

Which of the following is a source of supply for foreign exchange?

Options:

Import of goods and services

Foreign tourist in India

Remittances by foreigners working in India

Extension of loans to foreigners

Correct Answer:

Foreign tourist in India

Explanation:

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.