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Open Economy Macroeconomics — Economics STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEconomicsOpen Economy Macroeconomics4 Marks
Question
Define foreign exchange rate. Why does the demand for foreign exchange rise when its price falls?
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Answer

It is the price of foreign currency in terms of domestic currency.A fall in price of foreign currency in terms of domestic currency means foreign currency becomes cheaper. This would encourage more imports as imports become cheaper. So demand of foreign currency increase.

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