Question : Which of the following leads to increase in supply of foreign exchange
Option 1: Exports of visible and invisible
Option 2: Imports of visible and invisible
Option 3: Remittances to abroad
Option 4: foreign visits by Indians
Correct Answer:
Exports of visible and invisible
Solution : The correct answer is (a) Exports of visible and invisible.
Exports of visible goods (physical goods) and invisible goods (services) contribute to the supply of foreign exchange. When a country exports goods or services to other countries, it receives payments in foreign currency, which increases its foreign exchange reserves.
Imports of visible and invisible goods, on the other hand, contribute to the demand for foreign exchange, as the country needs to pay in foreign currency for the imported goods or services.
Remittances to abroad and foreign visits by Indians do not directly increase the supply of foreign exchange. Remittances involve sending money from one country to another, which may increase the foreign exchange reserves of the recipient country but not the country of origin. Similarly, foreign visits by Indians involve spending foreign currency, which increases the demand for foreign exchange.
