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Change in foreign exchange rate is an example of which dimension?

Answer and explanation

Correct answer: Economic dimension

The direct answer is Option B: the economic dimension. A foreign exchange rate is the value of one country’s currency compared with another country’s currency. It affects import costs, export earnings, international payments, and the price of goods purchased from abroad. The reasoning is: exchange rate is a financial and market variable; financial and market conditions belong to the economic environment; therefore Option B is correct. Option A, the social dimension, concerns culture, customs, population patterns, and lifestyle, not currency values. Option C, the political dimension, concerns government stability, policies, and political decisions; a government may influence exchange rules, but the exchange rate itself is an economic indicator. Option D, the technological dimension, concerns inventions, automation, and production techniques, not currency prices. Exam cue: inflation, interest rate, income, taxation effects on business, demand, supply, and exchange rate are generally economic indicators. Do not select political merely because governments sometimes influence currency policy.

Related tags

Economic DimensionExchange RateForeign Trade

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