Supply curve of foreign exchange slope upwards due to positive relationship between supply for foreign exchange and foreign exchange rate. ... The positively sloped supply curve (SS) shows that supply of foreign exchange rises from OQ1 to OQ2 when the exchange rate rises from OR, to OR2.

Explanation:

The supply curve of foreign exchange is upward sloping. This means that the quantity supplied of foreign exchange increases as the exchange rate increases. There are several reasons why the supply curve of foreign exchange is upward sloping.

1. Higher exchange rates increase the supply of foreign exchange

When the exchange rate is high, exporters receive more money for their goods and services. This means that they are more willing to sell their products in foreign markets. As a result, the supply of foreign exchange increases.

2. Higher interest rates increase the supply of foreign exchange

When interest rates are high, foreign investors are more likely to invest in a country's financial markets. This increases the demand for the country's currency, which in turn increases the supply of foreign exchange.

3. Higher economic growth increases the supply of foreign exchange

When a country's economy is growing, there is more demand for its goods and services. This leads to an increase in exports and an increase in the supply of foreign exchange.

4. Higher commodity prices increase the supply of foreign exchange

When commodity prices are high, countries that export commodities like oil, gold, and copper receive more money for their exports. This increases their willingness to sell their products in foreign markets, which in turn increases the supply of foreign exchange.

Conclusion:

In conclusion, the supply curve of foreign exchange is upward sloping because higher exchange rates, higher interest rates, higher economic growth, and higher commodity prices all increase the supply of foreign exchange.