Supply curve of foreign exchange ____________________.Vertical straight line parallel to Y-axisSlope downwardsSlope upwardsHorizontal straight line parallel to X-axis (2024)

FAQs

What is the supply curve for foreign exchange? ›

There is a positive relationship between the rate of foreign exchange and demand for foreign exchange. This means the higher the rate of foreign exchange, the higher will be the supply of foreign exchange and vice-versa. Thus supply curve slopes upwards.

In the case of Perfectly Inelastic Supply, the supply curve is a vertical straight line parallel to the Y-axis. This indicates that the quantity supplied remains constant regardless of price changes. No matter how much the price increases or decreases, the quantity supplied does not change.

A vertical straight line demand curve parallel to Y-axis shows no change in the demand irrespective of change in price. So that, Ed = 0. Q. When the slope of demand curve = infinity, the price elasticity of demand = 0.

If there is no change in the quantity supplied with changes in the price of the product, then the supply of that commodity becomes completely inelastic i.e., the elasticity of supply is zero and the supply curve will be a vertical line.

An FX forward curve is a curve that shows FX forward pricing for all the different dates in the future. FX forward pricing is determined by the current exchange rate, the interest rate differentials between the two currencies, and the length of the FX forward.

In most cases, the supply curve is drawn as a slope rising upward from left to right, since product price and quantity supplied are directly related (i.e., as the price of a commodity increases in the market, the amount supplied increases).

A vertical line is a line, parallel to y-axis and goes straight, up and down, in a coordinate plane. Whereas the horizontal line is parallel to x-axis and goes straight, left and right.

Question: When drawing a supply curve, we always place price on the vertical axis and quantity on the horizan axis.

The supply curve is shown in a graph with the price on the left vertical axis and the quantity supplied on the horizontal axis.

When the demand curve is parallel to the vertical axis, it means, that the same amount of goods are demanded at any price level. Which further means that there is no effect of change in price on the quantity demanded. Hence, the product is perfectly Inelastic and quantitatively, elasticity of demand is 0.

Is a vertical straight line parallel to the Y-axis in perfectly elastic demand? ›

Perfectly elastic demand curve is horizontal straight line. This is because at the given price the quantity demanded is infinite, even if there is a slight change in the price the demand becomes infinity and hence the curve is flat. A perfectly elastic price-demand curve is parallel to the X - axis.

Answer and Explanation:

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to Zero. If the demand curve is vertical, then it is perfectly inelastic. The perfectly inelastic demand is equal to zero.

A vertical supply curve parallel to Y axis implies that the elasticity of supply is zero.

The horizontal axis on the supply and demand diagram represents quantity. The vertical axis represents price. The supply curve is plotted as a line with an upward slope, pointing up and to the right.

In case of zero elastic supply,supply curve is a horiozontal striangle line.

Therefore, the supply curve in the foreign currency market is vertical because of its dependence on real interest rate and not real exchange rate, hence creating an inverse correlation with the net capital outflow.

Demand curve is downward sloping (due to the inverse relationship between exchange rate and the demand for foreign exchange).

Explanation: The supply curve of the US dollar is represented as an upward sloping curve because it shows the positive relationship between the supply of dollar in foreign exchange market to the total US imports, such that higher imports implies more supply of US dollar, and vice-versa.

The supply of foreign currency rises in the following situations: 1. When price of a foreign currency rises domestic goods become relatively cheaper. It induces the foreign country to increase their imports from the domestic country. As a result supply of foreign currency rises.