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Economics · 2023 · 3 marks
CBSE 2023 · Region 1 · Set 1 · Q12
“There exists a positive relation between foreign exchange rate and supply of foreign exchange.” Do you agree with the given statement? Justify your…
“There exists a positive relation between foreign exchange rate and supply of foreign exchange.” Do you agree with the given statement ? Justify your answer with valid arguments.
Marking-scheme solution
Yes.
When foreign exchange rate rises, the goods in domestic market become relatively cheaper for the buyers of the rest of the world. Thereby increasing the international competitiveness of Indian exports.
This raises demand for exports, which in turn may lead to increase in supply of foreign exchange and vice-versa.
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CBSE Class 12 Economics past-paper question from the 2023 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.