Explain why there is a rise in demand for foreign exchange when it's price falls?
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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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(a) A fall in the price of foreign currency implies that foreign goods become cheaper in relation to domestic goods. Thus, there is a increase in demand for foreign goods implying higher demand for foreign exchange.
(b) When the price of foreign currency falls, tourists from the home country find it cheaper to visit abroad. Thus, demand for foreign currency rises.
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