Question

When exchange rate of foreign currency rises its supply rises how? Economics 2th?

Answer 1

Rise in exchange rate of a foreign currency refers to appreciation of foreign currency in relation to domestic currency.

It causes a rise in supply of foreign currency owing to the following situations:

(i) It induces greater Foreign Direct Investment (FDI).

(ii) Appreciation of foreign currency induces greater exports from the domestic economy.

(iii) Appreciation of foreign currency increases direct purchase by the non-residents in the domestic economy.

(iv) It also increases remittances from abroad.