Question

What is the relationship between demand for foreign exchange and
exchange rate?
(a) Inverse
(b) Direct
(c) Equal ratio
(d) No relation ​

Answer 1

Answer:

A) inverse .

Exchange rate of foreign currency is inversely related to the demand. When price of a foreign currency rises, it results into costlier imports for the country. As imports become costlier, the demand for foreign products also reduce. This leads to reduction in demand for that foreign currency and vice-versa.

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Answer 2

Answer:

Exchange rate of foreign currency is inversely related to the demand. When price of a foreign currency rises, it results into costlier imports for the country. As imports become costlier, the demand for foreign products also reduce. This leads to reduction in demand for that foreign currency and vice-versa.