Question

explain with examples why there is rise in demand for foreign currency when there is current account deficit

Answer 1

because there are not demands of government

Answer 2

Current account deficit means that the autonomous outflows are more than the autonomous inflows.

Current account deficit can be corrected if there is a surplus in the capital account which includes transactions like borrowings, investment, change in foreign exchange reserves.

So inorder to correct the current account deficit, demand for foreign currency rises.