The graph shows the supply of dollars rising from S₁ to S₂. Which event could cause this? The supply of dollars shifts right from S₁ to S₂ while demand D stays put. Equilibrium moves from E₁ (₹80 per dollar, $40 billion) to E₂ (₹70 per dollar, $50 billion).

The graph shows the supply of dollars…

The graph shows the supply of dollars rising from S₁ to S₂.

Question 25

MediumOriginal question

The graph shows the supply of dollars rising from S₁ to S₂. Which event could cause this?

The supply of dollars shifts right from S₁ to S₂ while demand D stays put. Equilibrium moves from E₁ (₹80 per dollar, $40 billion) to E₂ (₹70 per dollar, $50 billion).

A rise in Indians travelling abroadCorrect answerYour answerA surge in foreign portfolio investment into Indian sharesCorrect answerYour answerA rise in India's gold importsCorrect answerYour answerIndian firms repaying foreign loansCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

Foreign investors bring in dollars to buy rupee assets, adding to supply at every rate.
The other three raise the demand for dollars.

Concept: What shifts supply of forex
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe flexible rate: depreciation and appreciation

Practise this chapter →

Ten questions from Foreign Exchange Rate, at your own pace.

Practise this chapter →

Ten questions from Foreign Exchange Rate, at your own pace.

The graph shows the supply of dollars rising from S₁ to S₂.

Question 25

Explanation