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Question : Increasing imports by a nation raises_____________ of foreign exchange.
Option 1: Supply

Option 2: Demand

Option 3: Both a and b

Option 4: None

Team Careers360 19th Jan, 2024

Answer (1)

Team Careers360 21st Jan, 2024

Correct Answer: Demand

Solution : The correct answer is (b) Demand.

Increasing imports by a nation raises the demand for foreign exchange. When a country imports goods or services from another country, it needs to pay in the currency of the exporting country. As a result, the demand for foreign currency increases as the importing country needs more foreign currency to make payments for its increased imports. This higher demand for foreign exchange is driven by the increased import activity of the nation.

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