What is meant by foreign exchange rate explain the three sources of demand for foreign exchange?

What are the sources of demand of foreign exchange?

Ans. Two sources of demand for foreign exchange are: (i) Imports from rest of the world. (ii) Foreign investment across the world.

What is meant by foreign exchange?

Foreign exchange, or forex, is the conversion of one country’s currency into another. In a free economy, a country’s currency is valued according to the laws of supply and demand. In other words, a currency’s value can be pegged to another country’s currency, such as the U.S. dollar, or even to a basket of currencies.

What are the three sources of supply of foreign exchange?

Three sources of supply of foreign exchange are: – Exports: it is an important source of supply of foreign exchange. – Grants and donation: a significant amount of foreign exchange flows from rich to poor countries. – Loans from rest of the world: it refers to borrowing from the rest of the countries.

What is meant by foreign exchange rate give three reasons?

Three sources of demand or outflow of foreign exchange are: 1)Imports: It requires foreign exchange because payments for imports are made in foreign exchange only. 2)Foreign Investment: Investment in rest of the world is an important business activity. We need foreign currency in which investment is to be made.

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What is meant by foreign exchange rate Class 12?

The rate at which one currency is exchanged for another is called Foreign Exchange Rate. In other words, the foreign exchange rate is the price of one currency stated in terms of another currency. For example, if one U.S dollar exchanges for 60 Indian rupees, then the rate of exchange is 1$ = Rs.

How is foreign exchange rate determined in the foreign exchange market explain?

In the foreign exchange market, the equilibrium exchange rate is determined by the intersection of the demand curve for foreign currency and the supply curve of the foreign currency. … If exchange rate rises to OR1, then the supply of foreign currency exceeds the demand for foreign.