Differbetween
- What is fixed and flexible exchange rate?
- What is meant by flexible exchange rate?
- What is the difference between fixed and pegged exchange rate?
- Which is preferable a fixed or a flexible exchange rate Why?
- What are the advantages of flexible exchange rate?
- What are the merits and demerits of flexible exchange rate?
- Who determines flexible exchange rate?
- What is flexible or floating exchange rate?
- What are the types of exchange rate?
- What is fixed exchange rate with example?
- What are costs and benefits of a fixed exchange rate?
- How is fixed exchange rate determined?
What is fixed and flexible exchange rate?
A fixed exchange rate is a rate which is maintained and controlled by the central government. A Flexible exchange rate is a rate which is determined by the market force. ... A flexible exchange rate is controlled by the demand and supply forces.
What is meant by flexible exchange rate?
A flexible exchange-rate system is a monetary system that allows the exchange rate to be determined by supply and demand. Every currency area must decide what type of exchange rate arrangement to maintain. Between permanently fixed and completely flexible however, are heterogeneous approaches.
What is the difference between fixed and pegged exchange rate?
A floating exchange rate is determined by the private market through supply and demand. A fixed, or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange rate.
Which is preferable a fixed or a flexible exchange rate Why?
Fixed rates are chosen to force a more prudent monetary policy, while floating rates are a blessing for those countries that already have a prudent monetary policy. A prudent monetary policy is most likely to arise when two conditions are satisfied.
What are the advantages of flexible exchange rate?
Advantage of Flexible Exchange Rates
- Independent Monetary Policy: ...
- Shock Absorber: ...
- Promotes Economic Development: ...
- Solutions to Balance of Payment Problems: ...
- Promotes International Trade: ...
- Increase in International Liquidity: ...
- Market Forces at Work: ...
- International Trade not Promoted by Fixed Rates:
What are the merits and demerits of flexible exchange rate?
Merits of Flexible Exchange Rates System:
- Problems of Undervaluation and Overvaluation are Avoided: ...
- Promotes Growth of Multilateral Trade: ...
- Flexible Exchange Rates does not Necessarily Show Large Fluctuations: ...
- It Ensures Individual Freedom: ...
- It Frees the Government from Problems of Balance of Payments:
Who determines flexible exchange rate?
Flexible exchange rates can be defined as exchange rates determined by global supply and demand of currency. In other words, they are prices of foreign exchange determined by the market, that can rapidly change due to supply and demand, and are not pegged nor controlled by central banks.
What is flexible or floating exchange rate?
A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.
What are the types of exchange rate?
An exchange rate regime is closely related to that country's monetary policy. There are three basic types of exchange regimes: floating exchange, fixed exchange, and pegged float exchange.
What is fixed exchange rate with example?
Currencies with fixed exchange rates are usually pegged to a more stable or globally prominent currency, such as the euro or the US dollar. For example, the Danish krone (DKK) is pegged to the euro at a central rate of 746.038 kroner per 100 euro, with a 'fluctuation band' of +/- 2.25 per cent.
What are costs and benefits of a fixed exchange rate?
In a floating exchange rate, countries with high inflation can merely devalue, therefore there is less anti-inflation discipline. 2. Helps reduce uncertainty and increase investment. Fixed exchange rates enable firms to plan ahead because they know future costs and prices of exports and imports.
How is fixed exchange rate determined?
A fixed or pegged rate is determined by the government through its central bank. The rate is set against another major world currency (such as the U.S. dollar, euro, or yen). To maintain its exchange rate, the government will buy and sell its own currency against the currency to which it is pegged.
