Sandeep Garg Class 12 Macroeconomics Solutions Chapter 11: Foreign Exchange Rates is explained by expert economics teachers from the latest edition of Sandeep Garg Macroeconomics Class 12 textbook solutions.
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Also read: Foreign Exchange Market
Sandeep Garg Solutions Class 12 – Chapter 11 – Part B
What is foreign exchange?
Foreign exchange refers to all the currencies other than the domestic currency of a given country.
Mention the effects of exchange depreciation on exports.
Currency/exchange depreciation leads to an increase in exports.
Additional reading: Determination of the Exchange Rate
State the three functions of the foreign exchange market.
The three functions of the foreign exchange market are as follows:
- Transfer function
- Credit function
- Hedging function
What is meant by the spot exchange rate?
The rate of exchange that prevails in the spot market at the time when a foreign currency is bought and sold is known as the spot exchange rate.
Define the foreign exchange market.
The foreign exchange market is the market where foreign currencies are bought and sold.
Explore link: Government Budget and the Economy
What is the shape of the demand curve of foreign exchange?
The demand curve is downward sloping due to the inverse relationship between the exchange rate and the demand for foreign exchange.
What does the forward exchange rate mean?
The exchange rate quoted in the forward transaction is known as the forward exchange rate.
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