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प्रश्न
"Under the flexible exchange rate system, the Central Bank does not intervene in the foreign exchange market."
Justify the statement, giving valid arguments.
उत्तर
Yes, the Central Bank does not intervene in the currency market under the flexible exchange rate regime.
- The exchange rate is determined by market forces, such as demand and supply of foreign money, in a flexible exchange rate system.
- The rise in the foreign exchange rate is caused by an increase in demand and a decrease in supply of foreign currency.
- The reduction in the foreign exchange rate is caused by a decrease in demand and an increase in supply of foreign exchange.
- Imports, direct purchases overseas, investment in the rest of the globe, repayment of international debts, and other factors influence forex demand.
- The supply of currency is determined by factors such as exports, direct purchases by the rest of the world, loans from the rest of the world, and so on.
संबंधित प्रश्न
Distinguish between the nominal exchange rate and the real exchange rate. If you were to decide whether to buy domestic goods or foreign goods, which rate would be more relevant? Explain.
What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?
Suppose a bond promises Rs.500 at the end of two years with no intermediate return. If the rate of interest is 5 percent per annum what is the price of the bond.
______ occurs when the currency exchange rate is officially lowered under a fixed exchange rate system.
The managed floating system is a combination of ______
If inflation is higher in country A than in Country B, and the exchange rate between the two countries is fixed, what is likely to happen to the trade balance between the two countries?
A system that allows adjustment in the fixed exchange rate is referred to as ______
Point out a demerit of the fixed exchange rate.
In a system of flexible exchange rates, the exchange rate is determined by the forces of ______
Exchange rate is the price of a currency expressed in terms of:
Explain the impact of home currency depreciation on the exports of a nation.
Suppose, the price of one UK Pound (£) has increased from ₹ 70 to ₹ 80, owing to market forces.
This means that value of Indian Currency (₹) has ______.
Giving valid reason, state whether the following statement is true or false:
Depreciation of the Indian Currency will lead to promotion of Indian exports.
