Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Open Economy Macro Economics

Question:

Which of the following is source of demand for foreign exchange?

Options:

Rita from Himachal Pradesh visiting Japan for office work

Kan-jung from South Korea visiting India for recreational tour

Reliance ltd. exporting products to America

Investment by a company from Britain in India

Correct Answer:

Rita from Himachal Pradesh visiting Japan for office work

Explanation:

The demand for foreign exchange arises in order to make payment in foreign currency. When, Rita visits Japan for office work all the expenses has to be done in Japanese Yen, thus demand for foreign currency increases. Where as in all the other options the supply of the currency is increasing. Kan-jung would exchange his currency for rupees, reliance ltd. will bring foreign currency is exchange of their goods and investment by a Britain company in India will bring in foreign capital resulting in increase of supply.