Giving two examples, explain why there is a rise in demand for a foreign currency when its price falls.

Distinguish between balance of trade and balance on current account.

Explain the impact of increase in supply of foreign exchange on price of foreign exchange, using suitable diagram.

Name the broad categories of transactions recorded in the 'Capital account' of the Balance of Payments Accounts.

If balance of trade is showing a deficit of ₹ 10,000 and value of exports is ₹ 15,000, then the value of imports will be ₹ 25,000. (True/ False)

Explain the concept of 'deficit' in balance of payments.

State whether the following transactions will be recorded on debit or credit side of BOP.

1. Loan from IMF to cover deficit of BOP.
2. Indian Government repays loan taken from IMF.
3. Purchase of shares of Infosys by a Japanese resident.
4. Export of Jute to Sri Lanka.
5. Acquisition of a foreign company by Tata.
6. Purchase of toys from China.

Explain four sources of supply of foreign exchange.

Identify the following items as credit or debit transactions on Balance of Payments account: Exports, imports, borrowing from rest of the world, lending to the rest of the world, import of software services.

What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?