EBK MACROECONOMICS
4th Edition
ISBN: 9781319117016
Author: KRUGMAN
Publisher: Worth Publishers
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Question
Chapter 19, Problem 10P
To determine
Concept Introduction:
Equilibrium in Exchange Market:
It is the point where the
Fixed Exchange Rate:
This is an exchange rate system under which there is an intervention by the government to control the fluctuation and this is known as fixed exchange rate.
Nominal Exchange Rate:
The rate at which currencies are exchanged in the exchange market is known as the nominal exchange rate.
Flexible Exchange Rate:
This is an exchange rate system under which there is no intervention by the government, rather the rate is determined by the demand and supply phenomenon.
To explain: The way to keep the exchange rate at a fixed value in the case of an increase in the demand of goods and services.
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