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Open Economy Macroeconomics — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsOpen Economy Macroeconomics3 Marks
Question
What are the functions of a foreign exchange market?
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Answer

  1. Transfer Function: Transfer function refers to transferring of purchasing power among countries.
  2. Credit Function: It implies provision of credit in terms of foreign exchange for the export and import of goods and services across different countries of the world.
  3. Hedging Function: Hedging function pertains to protecting against foreign exchange risks. Where Hedging is an activity which is designed to minimize the risk of loss.

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