Question

____ is one of the most important sources of demand for foreign currency ​

Answer 1

Answer:

Exports of goods and services from domestic country to foreign country

Answer 2

The correct answer is Imports.

• There are many factors and sources of demand for foreign currency like Imports, investments made abroad and some purchases which are directly made in foreign countries.
• Imports refer to sending one's national goods to foreign countries and this in order leads to demand growth for foreign currency and this leads to an increase in a nation's foreign exchange reserves which are essential for economic growth as well as development.
• These imports are to be paid in the currency prevailing in the foreign countries which are buying the goods from a nation. When the price of these foreign currencies lowers down then imports also get cheap accordingly.
• The other sources are also important but not as important as imports. Investments are an integral part of business-related activities and demand for foreign currency increases when such investments are to be made. Also for directly purchasing something from abroad, one needs foreign currency to initiate the transaction.

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