Identify the Demand for foreign exchange-

A. Demand for domestic goods by foreigners
B. Purchase of financial assets of a foreign country.
C. Studying abroad
D. Transfers made by foreigners to resident
E. Import of goods

Choose the correct answer from the options given below:

B, C and E only

The correct answer is Option (2) → B, C and E only

A. Demand for domestic goods by foreigners: This represents foreign buyers needing to exchange their currency for the domestic currency to purchase goods produced in the domestic country. This increases the supply of foreign exchange.

B. Purchase of financial assets of a foreign country: This requires exchanging domestic currency for the foreign currency to purchase the assets, hence increasing the demand for foreign exchange.

C. Studying abroad: Students going abroad will need to exchange their domestic currency for the foreign currency to pay for tuition and living expenses, increasing the demand for foreign exchange.

D. Transfers made by foreigners to resident: When such a transfer is made, it increase the supply of foreign exchange.

E. Import of goods: When a country imports goods, it needs to pay the foreign exporter in their currency. This creates a demand for the foreign currency and increases the demand for foreign exchange.