0
What else can I help you with?
Why does the supply curve in the foreign-currency exchange market become vertical in an open economy?
In an open economy, the supply curve in the foreign-currency exchange market becomes vertical because the central bank can adjust the supply of its currency to meet the demand, ensuring stability in the exchange rate.
What is the difference between a floating and a pegged exchange rate?
pegged exchange rate is officially fixed in terms of gold or any other currency in foreign exchange. Floating exchange rate is flexible rate in which value of currency is allowed to adjust freely determined by the supply & demand of foreign exchange
What is the meaning of dirty floating?
Dirty floating is a system where a currency's exchange rate is allowed to fluctuate freely based on market forces, but central banks also intervene occasionally to adjust the currency's value. This intervention can occur to stabilize the currency or to achieve other economic objectives.
What are the determinants of currency exchange rates in the long run?
In the long run, currency exchange rates are primarily determined by factors such as relative price levels, interest rates, and economic growth rates between countries. Purchasing power parity (PPP) suggests that exchange rates adjust to equalize the price of identical goods in different currencies. Additionally, differences in inflation rates can influence currency value, with lower inflation typically leading to a stronger currency. Furthermore, political stability and economic performance, including trade balances and capital flows, also play significant roles in determining long-term exchange rates.
How do you intrnational business seek to minimize foreign exchange risks?
International businesses minimize foreign exchange risks through various strategies, such as hedging with financial instruments like forwards, options, and swaps to lock in exchange rates. They may also diversify their currency exposure by conducting transactions in multiple currencies or using natural hedging by matching revenues and expenses in the same currency. Additionally, companies often engage in thorough market analysis and risk assessments to identify potential currency fluctuations and adjust their pricing strategies accordingly.
How you can overcome fluctuations in exchange rates?
To overcome fluctuations in exchange rates, businesses can utilize hedging strategies such as forward contracts or options, which allow them to lock in rates for future transactions. Diversifying markets and currency exposure can also mitigate risks by spreading potential losses across different currencies. Additionally, maintaining a flexible pricing strategy can help adjust to currency changes, while regular monitoring of market trends can inform timely decisions.
How do you people adjust to the limited space in Japan?
Since Japan has a strict building code they build upwards due to limited space.
How does currency fluctuation affect small business?
Currency fluctuations can significantly impact small businesses, particularly those involved in international trade. A strong domestic currency can make exports more expensive, potentially reducing sales abroad, while a weak currency can increase costs for imported goods and materials. Additionally, unpredictable exchange rates can complicate budgeting and pricing strategies, leading to potential profit margin erosion. Small businesses may need to implement hedging strategies or adjust pricing to mitigate these risks.
Why is adjusting the WACC upwards consistent with the overall corporate goal of shareholder wealth maximization?
why? isn't it to adjust it downwards to max. shareholders wealth?
What is difference between covered interest parity and uncovered one?
Covered interest parity (CIP) involves using forward contracts to hedge against exchange rate risk, ensuring that the return on investments in different currencies is equal after accounting for exchange rates. In contrast, uncovered interest parity (UIP) does not involve hedging; it posits that expected future exchange rates will adjust to offset interest rate differentials, meaning that investors take on currency risk. Essentially, CIP guarantees no arbitrage opportunities through forward contracts, while UIP relies on expectations of future currency movements without any hedging mechanism.
What are the advantages of a country having its own currency?
Having its own currency allows a country greater control over its monetary policy, enabling it to adjust interest rates and manage inflation according to its specific economic needs. It also provides the ability to respond more effectively to economic shocks and fluctuations. Additionally, a national currency can strengthen national identity and promote economic sovereignty, reducing dependency on foreign currencies. Lastly, it can enhance trade competitiveness by allowing for more flexible exchange rates.
What are the advantages and disadvantages of a common currency?
Advantages of a common currency include reduced transaction costs, increased price transparency, and enhanced economic integration among member countries, which can stimulate trade and investment. However, disadvantages include loss of monetary policy autonomy, as individual countries cannot adjust interest rates or exchange rates to respond to local economic conditions. Additionally, economic disparities between member states can lead to imbalances and tensions, as weaker economies may struggle under a unified currency system.
