Assertion (A): Demand for foreign exchange and exchange rate moves in ...
Explanation:Foreign exchange denotes the currency of one country that is converted into the currency of another country. The exchange rate is the price of one currency in terms of another currency.
The assertion is that demand for foreign exchange and exchange rate moves in the same direction. Let's analyze this assertion and the reason given for it.
Reasoning:The Reason given is that when the exchange rate rises, domestic goods become cheaper in the international market. This statement is true because when the exchange rate of a country rises, its currency becomes stronger, and the prices of goods and services in that country become relatively more expensive compared to other countries. Therefore, foreign consumers will demand fewer goods and services from that country, and the demand for foreign exchange will decrease.
However, the assertion that demand for foreign exchange and exchange rate moves in the same direction is false. This is because demand for foreign exchange depends on many factors such as imports, exports, capital flows, and tourism, among others. These factors can cause the demand for foreign exchange to increase or decrease, even if the exchange rate remains constant.
Conclusion:In conclusion, while the reason given for the assertion is true, the assertion itself is false. Therefore, the correct answer is option 'C', which states that Assertion (A) is false, but Reason (R) is true.