CBSE Class 12 Economics sample paper 2023-24: question 8
From the official CBSE sample question paper for 2023-24, section A, question 8, for 1 mark. Try it first; the hints and our step-by-step solution are below.
Q8 · 1 mark · MCQOpen Economy Macroeconomics
Identify the correct reason(s) that may affect the demand for foreign exchange in an economy.
I. Imports of visibles
II. Exports of invisibles
III. Remittances by residents working abroad
IV. Purchase of assets abroad
- (A)I and II
- (B)II and III
- (C)III and IV
- (D)I and IV
Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2023-24.
Hints
Open one hint at a time and try again before the next.
Hint 1
Who needs dollars: an importer or an exporter?
Hint 2
Does money sent home increase supply or demand of dollars?
Step-by-step solution
Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.
Demand for foreign exchange comes from payments to the rest of the world: imports of visibles (I) and purchase of assets abroad (IV).
- 1 mark
Exports of invisibles (II) and remittances received from residents working abroad (III) bring foreign exchange in, so they add to its supply. Answer: I and IV. Option (D).
Answer: (D) I and IV
Where the marks are
- Payments abroad create demand for foreign exchange (1 mark)
Revise the chapter
- Chapter: Open Economy Macroeconomics (notes, formulas, where marks are lost and every past question)
- Topic: Foreign Exchange Rate Systems
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