Question

Read the following statements carefully:
Statement 1: The price of a given currency in terms of another is known as bank rate.
Statement 2: Demand curve for foreign exchange is a downward sloping curve.

• A. Statement 1 is true and Statement 2 is false.
• B. Statement 1 is false and Statement 2 is true.
• C. Both Statements 1 and 2 are true.
• D. Both Statements 1 and 2 are false.

Hint:

The exchange rate determines currency price, not the bank rate, and the demand curve for foreign exchange slopes downward.

Answer 1

The Correct Option is B

\text{The price of a currency in terms of another is known as the exchange rate, not the bank rate. The demand curve for foreign exchange is downward sloping, indicating that as the price of foreign currency decreases, the quantity demanded increases.}