Question

Keeping other factors constant, explain how a spending of foreign tourists in the home country and fees payments of overseas students affect the…

Accepted Answer

Keeping other factors constant, the given situations may have the following likely impacts: - Spending of foreign tourists in the home country will ensure greater inflow of foreign exchange, leading to an increase in the supply of foreign currency. - Any spendings on account of fees and expenses by students from/to the home country to/from abroad will lead to outflow/inflow of foreign exchange, leading to an increase in the demand/supply of foreign currency.

Keeping other factors constant, explain how a spending of foreign tourists in the home country and fees payments of overseas students affect the demand and supply of foreign exchange.

Marking-scheme solution

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