How is the exchange rate influenced by inflation
‘The country has a floating exchange rate and its inflation rate is much higher than its trading partners. Why we would suppose the country’s exchange rate to deflate?’
Expert
Because of the consequence on demand and supply of currency and the new equilibrium. It distinguishes among real and nominal values.
5. What are the factors responsible for the recent surge in international portfolio investment?
Which transactions find out the balance of trade? When the balance of trade is in surplus?
Deficit in balance of trade point: Deficit in balance of trade points out that the imports of good are bigger than exports.
Balance of payment: It is a systematic record of each and every economic transaction of a country with the rest of world in an accounting year.
‘Can foreign exchange markets be analyzed in similar manner as the markets for ordinary physical commodities? Do demand slope downwards and supply slope upwards for currencies?’
Examining US–Canadian imports-exports and analyzing a call to protect the US lumber business.
If exchange rate of foreign currency downs or falls, its demand rises. Describe how? Answer: If exchange rate falls, an import become cheaper, demand for imports in
Managed floating rate system: This is a system in which foreign exchange rate is found out by market forces and central bank is a key contributor to stabilize the currency in condition of tremendous appreciation or depreciation.
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