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Which of the following are the reasons for the flow of foreign currency?
1. Exports by a country lead to the purchase of its domestic goods and services by the foreigners
2. Foreigners send gifts or make transfers
3. The assets of a home country are bought by the foreigners
Choose from the following options.
- a)1 and 2 Only
- b)2 and 3 Only
- c)1 and 3 Only
- d)All of the above
Correct answer is option 'D'. Can you explain this answer?
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Which of the following are the reasons for the flow of foreign curren...
Foreign currency flows into the home country due to the following reasons: exports by a country lead to the purchase of its domestic goods and services by the foreigners; foreigners send gifts or make transfers; and, the assets of a home country are bought by the foreigners.
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Which of the following are the reasons for the flow of foreign curren...
The correct answer is option 'D' - All of the above.
1. Exports by a country lead to the purchase of its domestic goods and services by foreigners:
- When a country exports its goods and services to other countries, it receives payments in foreign currency. These payments increase the flow of foreign currency into the country.
- Foreigners purchase domestic goods and services, which creates a demand for the country's currency and leads to an inflow of foreign currency.
2. Foreigners send gifts or make transfers:
- Foreigners may send gifts or make transfers to individuals or organizations in another country. These transfers are typically made in the currency of the recipient's country.
- This results in an inflow of foreign currency into the recipient's country.
3. The assets of a home country are bought by foreigners:
- When foreigners buy assets such as real estate, stocks, or bonds in a home country, they need to convert their currency into the currency of the country where the assets are located.
- This leads to an inflow of foreign currency into the home country.
In summary, the flow of foreign currency occurs due to various reasons such as exports, gifts/transfers from foreigners, and foreign investments in the form of asset purchases. These activities result in an inflow of foreign currency into a country, which has implications for its exchange rates, balance of payments, and overall economic conditions.
1. Exports by a country lead to the purchase of its domestic goods and services by foreigners:
- When a country exports its goods and services to other countries, it receives payments in foreign currency. These payments increase the flow of foreign currency into the country.
- Foreigners purchase domestic goods and services, which creates a demand for the country's currency and leads to an inflow of foreign currency.
2. Foreigners send gifts or make transfers:
- Foreigners may send gifts or make transfers to individuals or organizations in another country. These transfers are typically made in the currency of the recipient's country.
- This results in an inflow of foreign currency into the recipient's country.
3. The assets of a home country are bought by foreigners:
- When foreigners buy assets such as real estate, stocks, or bonds in a home country, they need to convert their currency into the currency of the country where the assets are located.
- This leads to an inflow of foreign currency into the home country.
In summary, the flow of foreign currency occurs due to various reasons such as exports, gifts/transfers from foreigners, and foreign investments in the form of asset purchases. These activities result in an inflow of foreign currency into a country, which has implications for its exchange rates, balance of payments, and overall economic conditions.
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Which of the following are the reasons for the flow of foreign currency? 1. Exports by a country lead to the purchase of its domestic goods and services by the foreigners2. Foreigners send gifts or make transfers3. The assets of a home country are bought by the foreignersChoose from the following options.a) 1 and 2 Onlyb) 2 and 3 Onlyc) 1 and 3 Onlyd) All of the aboveCorrect answer is option 'D'. Can you explain this answer?
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