Imports generate the supply of the domestic currency and exports generate the demand for the domestic currency in the forex market.

Question

Quizplus · Accepted Answer

This is a basic principle of currency exchange in the forex market. When a country exports goods or services, they receive payment in their domestic currency, which generates demand for that currency in the market. Conversely, when a country imports goods or services, they must pay in the foreign currency, which increases the supply of their domestic currency in the market.

Imports Generate the Supply of the Domestic Currency and Exports