Question

Short Answer Type Questions:
Give the meaning of:
(i) Foreign Exchange;
(ii) Foreign Exchange Rate;
(iii) Foreign Exchange Market.

Answer 1

Foreign exchange refer to the currencies of different countries. We can say, foreign exchange is a system dealing with the currencies of different countries.

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.

Trading of currencies of different countries take place in foreign exchange market. It is a highly decentralized global market. The forces of foreign exchange market determines the foreign exchange market.