How is exchange rate determined in the foreign exchange market? Explain.
CBSE OUTSIDE DELHI - SET 1 2013
Download our app for free and get started
It is determined by the forces of demand and supply of foreign exchange. The price and demand for foreign exchange are inversely related and supply and price of foreign exchange are directly related. The price at which demand and supply are equal is the price determined by the market.
Download our appand get started for free
Experience the future of education. Simply download our apps or reach out to us for more information. Let's shape the future of learning together!No signup needed.*
Similar Questions
- 1View SolutionWhen price of a foreign currency rises, its supply also rises. Explain why.
- 2View SolutionWhen price of a foreign currency rises, its demand falls. Explain why.
- 3View SolutionClassify whether the following trans actions will be recorded in current account or capital account.
- Purchase of shares of Tata by Microsoft.
- Imports of computer spare parts from America.
- Borrowings from World Bank.
- Repayment of loan by Indian Government taken from Japan.
- Gifts received from a relative in Australia.
- Purchase of Land in China.
- Import of machinery.
- 4View SolutionDistinguish between the nominal exchange rate and the real exchange rate. If you were to decide whether to buy domestic goods or foreign goods, which rate would be more relevant? Explain.
- 5View SolutionBalance of Trade shows a deficit of ₹ 5,000 crore. Value of exports is ₹ 4,000 crore. Find out the value of imports.
- 6View SolutionDiscuss some of the exchange rate arrangements that countries have entered into to bring about stability in their external accounts.
- 7View SolutionHow does giving incentives for exports influence foreign exchange rate? Explain.
- 8View SolutionVisits to foreign countries for sightseeing etc. by the people of India is on the rise. What will be its likely impact on foreign exchange rate and how?
- 9View SolutionExplain the impact of rise in exchange rate on national income.
- 10View SolutionExplain the effect of appreciation of domestic currency on imports.