Question

The Demand Curve for Foreign Exchange Is

Answer 1

a) Downward sloping

b) Upward sloping

c) Horizontal

d) Vertical

Answer: a) Downward sloping

This is due to the fact that with the rise in price of foreign exchange, there is a corresponding increase in the rupee cost of foreign goods, which makes the goods more expensive.

As a result the import declines and subsequently there is decline in the demand for foreign exchange.

Also read:

• Deriving a Demand Curve From Indifference Curves and Budget Constraints
• Slope of the Demand Curve

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