What is the importance of the exchange rate system for business?

Can international business operate more easily in a fixed exchange rate system or in a flexible exchange-rate syatem?

An international business will operate more easily in a fixed exchange rate system. Knowing what the equivalency of goods will allow for predetermined forecasting, however, a fixed rate decreases the opportunity for profits.

How exchange rate movements influence business decision?

how exchange-rate movements influence business decisions

Importance of foreign exchange rate?

The foreign exchange rate helps determine the value of money. When the exchange rate is high, then the currency is less valuable.

Which foreign exchange system has the highest foreign exchange rate?

The Zimbabwean has the highest foreign exchange rate.

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 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 is crawling peg in exchange rate system?

Crawling peg is a compromise between fixed & flexible exchange rate.

The collapse of the fixed-exchange-rate system led to what new system?

This led to a managed flexible-exchange-rate system with agreement among major countries that they would try to coordinate exchange rates based on price indexes.

What are the advantages of a fixed exchange rate system compared to a floating exchange rate system?

In a fixed exchange rate system, the advantages include stability in international trade and investment, reduced uncertainty for businesses, and lower inflation rates. This system can also help countries maintain control over their currency value and prevent sudden fluctuations.

Debate the relative merits of fixed and floating exchange rate regimes from the perspective of an international business what are the most important criteria in a choice between the systems?

Debate the relative merits of fixed and floating exchange rate regimes from the perspective of an international business what are the most important criteria in a choice between the systems? Which system is the more desirable for an international business?The case for fixed exchange rates rests on arguments about monetary discipline, speculation, uncertainty, and the lack of connection between the trade balance and exchange rates. In terms of monetary discipline, the need to maintain fixed exchange rate parity ensures that governments do not expand their money supplies at inflationary rates. In terms of speculation, a fixed exchange rate regime precludes the possibility of speculation. In terms of uncertainty, a fixed rate regime introduces a degree of certainty in the international monetary system by reducing volatility in exchange rates. Finally, in terms of trade balance adjustments, critics question the closeness of the link between the exchange rate and the trade balance. The case for floating exchange rates has two main elements: monetary policy autonomy and automatic trade balance adjustments. In terms of the former, it is argued that a floating exchange rate regime gives countries monetary policy autonomy. Under a fixed rate system, a country's ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity. In terms of the later, under the Bretton Woods system, if a country developed a permanent deficit in its balance of trade that could not be corrected by domestic policy, the IMF would agree to a currency devaluation. Critics of this system argue that the adjustment mechanism works much more smoothly under a floating exchange rate regime. They argue that if a country is running a trade deficit, the imbalance between the supply and demand of that country's currency in the foreign exchange markets will lead to depreciation in its exchange rate. An exchange rate depreciation should correct the trade deficit by making the country's exports cheaper and its imports more expensive. It is a matter of personal opinion in regard to which system is better for an international business. We do know, however, that a fixed exchange rate regime modeled along the lines of the Bretton Woods system will not work. Nevertheless, a different kind of fixed exchange rate system might be more enduring and might foster the kind of stability that would facilitate more rapid growth in international trade and investment. (cbapp.csudh.edu/depts/finance/hmilgrim/Business%20445/Chap010.PPT)

What is a floated exchange rate?

Simply put, it is an exchange rate system that allows market forces of demand and supply to regulate the economy's exchange rate, rather than allowing central authorities of a country fix it.

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.