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Long Answer Type Questions :
Discuss in brief: (i) Fixed exchange rate system; (ii) Flexible exchange rate system; and (iii) Managed floating rate system.
Discuss in brief: (i) Fixed exchange rate system; (ii) Flexible exchange rate system; and (iii) Managed floating rate system.
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Solution
Fixed rate of exchange refers to the rate of exchange as fixed by the
government. Historically, it has two variants; Gold standard system of
exchange rate and Bretton woods system of exchange rate.Flexible rate of exchange is the rate which is determined by the
supply-demand forces in the foreign exchange market. It is also called
'free exchange rate' as it is determined by the free play of supply and
demand forces in the international money market.Managed floating is a tool employed by the Central bank to restore the
value of the country's currency in relation to other countries within
the desired limits, even when the exchange rate is determined by the
market forces of demand and supply.
Fixed rate of exchange refers to the rate of exchange as fixed by the
government. Historically, it has two variants; Gold standard system of
exchange rate and Bretton woods system of exchange rate.
Flexible rate of exchange is the rate which is determined by the
supply-demand forces in the foreign exchange market. It is also called
'free exchange rate' as it is determined by the free play of supply and
demand forces in the international money market.
Managed floating is a tool employed by the Central bank to restore the
value of the country's currency in relation to other countries within
the desired limits, even when the exchange rate is determined by the
market forces of demand and supply.
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