Question :
The balance of payments of a country is in equilibrium when the:
Option 1:
Demands as well as supply of domestic currency are the highest
Option 2:
Demand for the domestic currency is equal to its supply

Option 3: Demand for the domestic currency is the highest

Option 4: Demand for the domestic currency is lowest

Question

Question :

The balance of payments of a country is in equilibrium when the:

Option 1:

Demands as well as supply of domestic currency are the highest

Option 2:

Demand for the domestic currency is equal to its supply

Option 3: Demand for the domestic currency is the highest

Option 4: Demand for the domestic currency is lowest

Team Careers360 · Accepted Answer

Correct Answer:

Demand for the domestic currency is equal to its supply

Solution : The correct option is Demand for the domestic currency is equal to its supply.

When the supply of the domestic currency is equal to the demand for it, a nation's balance of payments is in equilibrium. The international exchange rate is said to be steady when demand and supply for a certain currency are both equal. This equilibrium shows that the country's currency is neither overvaluing nor depreciating excessively in the foreign exchange market. It displays a balance in global financial flows.

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