Demand for Currency from Foreign Needs Steps:

• Identify sources of demand: Foreigners buy a country's currency to purchase exports or invest in the country.
• Evaluate exports: Higher exports require foreigners to acquire more local currency, boosting demand.
• Check interest rates: Lower rates deter foreign investment, reducing currency demand.
• Assess investments: Less inward investment means fewer foreigners buying the currency.
• Review imports: More imports lead locals to sell their currency for foreign goods, increasing supply not demand.

Why B is correct:

• Increased exports mean foreigners must exchange their currency for the local one to pay, directly raising demand per the balance of payments definition.

Why the others are wrong:

• A: Lower interest rates reduce attractiveness for foreign capital inflows, decreasing currency demand.
• C: Decreased inward investment means less foreign buying of the currency for investments.
• D: Higher imports increase the supply of local currency as residents buy foreign currency.

Final answer: B