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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.
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
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