Explain the impact of increase in supply of foreign exchange on price

cbse-class-12

#1

Explain the impact of increase in supply of foreign exchange on price of foreign exchange, using suitable diagram.


#2

Price of foreign exchange refers to foreign exchange rate. So, when there is an increase in supply of foreign exchange, keeping demand for foreign exchange constant, then this causes a fall in the foreign exchange rate. Hence, it leads to appreciation of domestic currency.
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