CBSE 2020 Class 12 Economics Delhi Set 3

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Question : 6
Total: 10
Explain the relationship between fall in price of a US Dollar ( $ ) and its demand.
Solution:  
There is an inverse relationship between the price of US Dollar and its demand.
Fall in price of US Dollar will increase the demand for US Dollars in the foreign exchange market.
Explanation : For example, if rupee-dollar exchange rate falls from 75$ to 72$, Indians have to pay less rupees to import US goods. This increases demand for imports of foreign goods (US goods). This results in more outflow of foreign exchange from India. Therefore, demand for foreign exchange (Dollars) increases, other things remaining constant.
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