Question

State two sources of supply of foreign exchange.

Hint:

The supply of foreign money comes from selling things to foreigners (exports) and from foreigners investing in your country.

Answer 1

The supply of foreign exchange into a country comes from all transactions that result in payments from foreigners. Two major sources are:

Exports of Goods and Services: When a country sells its products to other countries, it receives payment in foreign currency, which increases the supply of that currency.
Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI): When foreign companies or individuals invest in the domestic economy (e.g., by building a factory or buying stocks), they bring in foreign currency.