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Give the meaning of foreign exchange rate. How is it determined under flexible exchange rate regime?
Give the meaning of foreign exchange rate. How is it determined under flexible exchange rate regime?
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Solution
Foreign exchange rate is the rate of domestic currency which can be
exchanged for foreign currency. Some economists refer to it as the
external value of the domestic currency.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.
Foreign exchange rate is the rate of domestic currency which can be
exchanged for foreign currency. Some economists refer to it as the
external value of the domestic currency.
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.
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