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The rate of currency is usually fixed based on the stock exchange.
Wiki User
∙ 10y ago
Wiki User
∙ 10y agoThe rate of currency is fixed by other single currency. This is fixed in basket of other currencies in gold.
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Advantages of a fixed rate of exchange?
A fixed exchange rate system is one where the value of the exchange rate is fixed to another currency. This means that the government have to intervene in the foreign exchange market to maintain the fixed rate. The equilibrium exchange rate may be either above or below the fixed rate. In Figure 1 below, the equilibrium is above the fixed rate. There is a shortage of the national currency at the fixed rate. This would normally force the equilibrium exchange rate upwards, but the rate is fixed and so cannot be allowed to move. To keep the exchange rate at the fixed rate the government will need to intervene. They will need to sell their own currency from their foreign exchange reserves and buy overseas currencies instead. This has the effect of shifting the supply curve to S2 and as a result, their foreign currency holdings will rise.
What is the effect of a currency revaluation?
Currency revaluation is the equivalent of currency appreciation, except that it occurs under a fixed exchange rate regime and is mandated by the government.
What is the type of currency exchange rate system in which values stay constant?
A currency whose value is fixed either to the value of another currency, or to the value of gold, is called a "pegged currency"
What are fixed exchange rate system and currency board system?
A fixed exchange rate system is where a country's exchange rate regime under which the government or central bank ties the official exchange rate to another country's currency (or the price of gold). The purpose of a fixed exchange rate system is to maintain a country's currency value within a very narrow band. Also known as pegged exchange rate. Fixed rates provide greater certainty for exporters and importers. This also helps the government maintain low inflation, which in the long run should keep interest rates down and stimulate increased trade and investment. however I'm not sure what a currency board system is....sorry.
Who decides the value of rupee in terms of dollar?
The demand and supply forces in the currency markets determine the rate of the rupee to the dollar. The currency is not fixed by a central bank.
Advantages of a fixed rate of exchange?
A fixed exchange rate system is one where the value of the exchange rate is fixed to another currency. This means that the government have to intervene in the foreign exchange market to maintain the fixed rate. The equilibrium exchange rate may be either above or below the fixed rate. In Figure 1 below, the equilibrium is above the fixed rate. There is a shortage of the national currency at the fixed rate. This would normally force the equilibrium exchange rate upwards, but the rate is fixed and so cannot be allowed to move. To keep the exchange rate at the fixed rate the government will need to intervene. They will need to sell their own currency from their foreign exchange reserves and buy overseas currencies instead. This has the effect of shifting the supply curve to S2 and as a result, their foreign currency holdings will rise.
What is the effect of a currency revaluation?
Currency revaluation is the equivalent of currency appreciation, except that it occurs under a fixed exchange rate regime and is mandated by the government.
What is the type of currency exchange rate system in which values stay constant?
A currency whose value is fixed either to the value of another currency, or to the value of gold, is called a "pegged currency"
What are fixed exchange rate system and currency board system?
A fixed exchange rate system is where a country's exchange rate regime under which the government or central bank ties the official exchange rate to another country's currency (or the price of gold). The purpose of a fixed exchange rate system is to maintain a country's currency value within a very narrow band. Also known as pegged exchange rate. Fixed rates provide greater certainty for exporters and importers. This also helps the government maintain low inflation, which in the long run should keep interest rates down and stimulate increased trade and investment. however I'm not sure what a currency board system is....sorry.
What is the meaning of parity value in foreign exchange?
In a pegged/fixed exchange rate system the value of currency is fixed in terms of gold or the value of other currency.This value is the parity value of the currency
When does a currency crisis occur?
A currency crisis occurs when a country can no longer support the price of its currency in foreign-exchange markets under a fixed-exchange-rate system.
What is one alternative to a currency crisis?
One alternative to a currency crisis or to continuing to try to support a fixed exchange rate is to devalue unilaterally.
What is the currency cocktails bonds?
lDenominated in a currency basket, like the SDRs or ECUs instead of a single currency.lOften called currency cocktail bonds.Typically straight fixed rate debt
Who decides the value of rupee in terms of dollar?
The demand and supply forces in the currency markets determine the rate of the rupee to the dollar. The currency is not fixed by a central bank.
What is the difference in how the exchange rate reflects the supply and demand for the currency between a flexible-exchange rate system and a fixed-rate exchange system?
Fixed Exhange-Rate System: currency system in which governments try to keep the values of their currencies constant against one another Flexible Exchange- Rate System: allows the exchange rate to be determined by supply and demand. With a flexible exchange- rate system, exchange rates need not fall into any prespecified range.
What exchange rate system allows for fluctuations in currency values on a day-to-day basis?
A flexible exchange rate system allows for fluctuations in currency values on a day-to-day basis. Another kind of system would be a fixed exchange rate system.
What are the four amounts used in measuring transactions and events?
currency rate,money circulation,current assets,fixed assets
