Identify the correct reasons that may affect the demand for foreign exchange in an economy.

(A) Import of visibles.

(B) Export of invisibles.

(C) Remittances by residents working abroad.

(D) Purchase of assets abroad.

Choose the correct answer from the options given below:

Option 1 -> Includes (B) which increases supply of foreign exchange, not demand.

Option 2 -> Both (B) and (C) increase supply of foreign exchange, not demand.

Option 3 -> (C) increases supply of foreign exchange, not demand.

Option 4 -> Both correctly identify factors that increase demand for foreign exchange.

Hence, Option 4: (A) and (D) only -> Demand for foreign exchange arises when domestic residents need foreign currency. (A) Import of visibles requires payment to foreign suppliers in their currency, increasing demand for foreign exchange. (D) Purchase of assets abroad requires converting domestic currency to foreign currency, increasing demand. However, (B) Export of invisibles and (C) Remittances by residents working abroad both bring foreign currency into the country, thus increasing the supply of foreign exchange, not demand. -> correct