explain any three reasons each for increase in demand and increase in supply of foreign exchange?
Answers
Answer:
Three sources of demand or outflow of foreign exchange are:
1)Imports: It requires foreign exchange because payments for imports are made in foreign exchange only.
2)Foreign Investment: Investment in rest of the world is an important business activity. We need foreign currency in which investment is to be made.
3)Direct purchase Abroad: Foreign exchange is needed to make direct purchases of goods and services from abroad.
Three sources of supply of foreign exchange are :
1) Exports: Exports of goods and services is an important source of supply of foreign exchange.
2)Grants and donations from rest of the world: A significant amount of foreign exchange flows from rich to poor countries by way of grants and donations.
3)Loans form rest of the world: It refers to the borrowings from rest of the world. It contributes to the supply of foreign exchange.
Three sources of demand or outflow of foreign exchange are:
1)Imports: It requires foreign exchange because payments for imports are made in foreign exchange only.
2)Foreign Investment: Investment in rest of the world is an important business activity. We need foreign currency in which investment is to be made.
3)Direct purchase Abroad: Foreign exchange is needed to make direct purchases of goods and services from abroad.
Three sources of supply of foreign exchange are :
1) Exports: Exports of goods and services is an important source of supply of foreign exchange.
2)Grants and donations from rest of the world: A significant amount of foreign exchange flows from rich to poor countries by way of grants and donations.
3)Loans form rest of the world: It refers to the borrowings from rest of the world. It contributes to the supply of foreign exchange.
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