Explain two sources each of demand and supply of foreign exchange.
CBSE DELHI - SET 1 2009
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Sources of demand for a foreign currency:
- For imports payment is to be made in foreign currency. So it is a source of its demand.
- For transfer payments to other country in the form of gifts or remittance, etc., foreign currency is needed.
- For making investments in other countries foreign currency is needed.
- Payment for exports are received in foreign currency. So exports are a source of its supply.
- Factor income earned from abroad is a source of supply of foreign currency as it is received in foreign currency.
- Remittances from abroad are also in foreign currency. So it is also a source of supply of foreign currency.
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