The supply of foreign exchange is
A)determined by the real exchange rate.
B)independent of the real exchange rate.
C)determined by central bankers.
D)determined by the government of the country concerned.

Question

Quizplus · Accepted Answer

The supply of foreign exchange is not determined by the real exchange rate or any specific government or central bank. It is mainly determined by the willingness of foreign entities to supply currency to the foreign exchange market, which is independent of the real exchange rate. Factors affecting the supply of foreign currency include foreign investment, trade balance, and borrowing. Therefore, option B is the best choice.

The Supply of Foreign Exchange Is