Which statement is true regarding the relationship between currency supply and price?

Greater demand for a currency indeed increases its price due to the fundamental principles of supply and demand in the foreign exchange market. When more people or businesses want to acquire a particular currency (high demand), they are typically willing to pay more to obtain it. This increased competition among buyers drives the price up.

In contrast, when demand for a currency decreases, fewer buyers are competing to purchase it, which leads to a decrease in its price. This basic economic principle illustrates how demand directly correlates to the price of a currency, which is essential for understanding currency valuation in international business.

The incorrect statements do not align with this principle. For instance, a greater supply of a currency generally reduces its price, as an increased availability with steady or reduced demand typically lowers the value. Similarly, a lower supply does not inherently lower the price, as it can also lead to higher prices if demand remains steady or increases. Lastly, lower demand decreasing the price is in line with common economic theory, confirming the correctness of the understanding regarding demand's influence on currency price.