Which of the following statements accurately describes the foreign exchange market dynamics related to Pakistan's net exports?

Show Answers

A rise in Pakistan’s net exports lowers the supply of rupees, causing the rupee to depreciate.An increase in Pakistan’s net exports boosts the demand for rupees, leading to rupee appreciation.Higher net exports from Pakistan raise the supply of rupees, resulting in rupee depreciation.An increase in Pakistan’s net exports reduces the demand for rupees, causing the rupee to appreciate.

Explanation

Option A is correct because when Pakistan’s net exports increase, fewer rupees are supplied in the foreign exchange market, which leads to a depreciation of the rupee. Other options incorrectly describe the relationship between net exports, rupee supply or demand, and its value.