Question

Explain the relationship between fall in price of a VS Dollar ($) and its demand.

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Answer 1

Answer:

When price of a foreign currency falls, imports from that, foreign, country become cheaper. So, imports increase and hence, the demand for foreign currency rises. For example, if price of 1 US dollar falls from Rs 60 to T 55, then imports from The USA will increase as American goods will become relatively cheaper.

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Answer 2

Explain the relationship between fall in price of a VS Dollar ($) and its demand.

• Demand for foreign money decreases when the exchange rate increases and increases when the exchange rate of foreign currency decreases. Because of this, the demand curve for foreign exchange starts to slope downward, indicating an inverse relationship.
• The value of imports will decrease over time as the cost of imports increases and the cost of exports decreases, which will result in a decrease in the demand for foreign exchange. The interaction of a market's supply and demand factors determines price. The desire of consumers and producers to engage in purchasing and selling is represented by demand and supply. When buyers and sellers can agree on a price, a product exchange takes place.
• As the price of a currency increases because domestic goods become more affordable, demand for that currency declines and supply increases. It encourages the foreign currency to increase their domestic imports. The worth of the dollar and the price level are inversely related in that as prices rise, less can be bought with a given dollar. As a result, the dollar will be worth less.
• A declining dollar reduces its purchasing power globally, which eventually affects consumer prices. For instance, a weaker dollar makes it more expensive to import oil, which drives up the price of oil. As a result, a dollar now only buys so much gas, which hurts many people.

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