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 exchange rate, not the bank rate, defines a currency's value relative to another. The foreign exchange demand curve slopes downward; a lower price for foreign currency leads to a higher quantity demanded.}