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The foreign exchange rate and supply of foreign exchange is positively related and it is upward sloping curve as because the components of supply of foreign exchange rise as foreign exchange rate rises. For example, exports rise as the foreign exchange rate rises.
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Increase in foreign exchange rate leads to rise in supply of foreign exchange.
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Short Answer Type Questions:
What is meant by foreign exchange rate? Why does a rise in foreign exchange rate cause a rise in its supply?
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Explain why the supply of a foreign currency rises in response to a rise in its exchange rate.
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Why are foreign exchange rate and supply of foreign exchange directly related? Explain.
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What is the relationship between supply of foreign exchange and exchange rate?
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