PQ 22b
What is a situation the
Exchange rate is defined as the value of one nation's currency compared to the currency of some other nation. Exchange rate is of two types: floating exchange rate and fixed exchange rate. In same of fixed exchange rate system, the exchange rate is fixed by the government. A fixed price is established in relation to a major world currency. Flexibility or floating exchange rate is determined by the free forces of demand and supply in the market. It is a self correcting exchange rate in which any difference in supply and demand is automatically corrected by the market. The central bank may also intervene in this market when it is essential to ensure stability and avoid inflation.
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