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in Economics by (59.7k points)

When exchange rate of foreign currency rise its supply rises? Explain.

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A rise in foreign exchange rate makes home country’s goods cheaper to foreigners so they will purchase more goods and services, as a result demand for country’s goods increases in foreign market which leads to increase in country’s exports. At the same time foreigners who want to invest in home country will invest more, more foreign tourists will come to visit home country. This brings a greater supply of foreign exchange. Hence supply of foreign currency rises.

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