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What requires that the currencies of other countries have an exchange rate that is fixed to the dollar?
A fixed exchange rate system requires that the currencies of other countries maintain a stable value relative to the U.S. dollar. This is often achieved through government intervention, where a country’s central bank buys or sells its currency in the foreign exchange market to maintain its pegged value. Such a system can help reduce exchange rate volatility, promote trade stability, and provide greater predictability for international transactions. However, it also limits a country’s monetary policy flexibility and can lead to economic imbalances if not managed properly.
What is crawling peg in exchange rate system?
Crawling peg is a compromise between fixed & flexible exchange rate.
What is the difference between spot and forward exchange rate?
In forward exchange rate, the rate is booked in advance for a fixed amount and period,which will remain unchanged in case of any market fluctuation or deceleration.In fact forward exchange rate booking is done to protect or guard against volatile market condition. In spot exchange rate, the exchange rate prevalent on a particular date is booked for immediate effect.
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
Difference between Spot Exchange Rate and Exchange rate?
An exchange rate, which is also called the foreign-foreign exchange rate, is the rate that currency will be exchanged for another currency and may have a forward contract. The spot exchange rate is the current exchange rate today with immediate delivery and it is also called benchmark rates and outright rates.
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 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.
Why a cut in government spending has a larger effect under a fixed exchange rate system and perfect capital mobility than in a closed economy?
fixed and floating exchange rates
Can central banks fix the rate of exchange?
Yes, central banks can fix the rate of exchange through a system known as a fixed or pegged exchange rate regime. In this system, the central bank commits to maintaining the currency's value at a specific rate relative to another currency or a basket of currencies. To maintain this fixed rate, the central bank may intervene in the foreign exchange market by buying or selling its currency. However, sustaining a fixed exchange rate can be challenging and may require substantial reserves and consistent economic policies.
Does Canada have a fixed exchange rate?
No.
Which is more conducive to international trade the fixed or the floating exchange rate?
fixed rate
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.
What requires that the currencies of other countries have an exchange rate that is fixed to the dollar?
A fixed exchange rate system requires that the currencies of other countries maintain a stable value relative to the U.S. dollar. This is often achieved through government intervention, where a country’s central bank buys or sells its currency in the foreign exchange market to maintain its pegged value. Such a system can help reduce exchange rate volatility, promote trade stability, and provide greater predictability for international transactions. However, it also limits a country’s monetary policy flexibility and can lead to economic imbalances if not managed properly.
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.
How the rate of currency is fixed?
The rate of currency is usually fixed based on the stock exchange.
What is crawling peg in exchange rate system?
Crawling peg is a compromise between fixed & flexible exchange rate.
What is LCD MNF sales?
It is manufacturer sales at a fixed exchange rate to USD (usually the most recent exchange rate).
