Question

Distinguish between fixed and variable exchange rate

Answer 1

Fixed exchange rate is a system wherein there is a central authority which determines the exchange rate of a currency wrt to other curriencies.The central authority is usually the central bank of a country.

On the other hand,variable exchange rate system or floating exchange rate system is a system wherein the exchange rates are determined by the market forces that is to say the demand and supply of the currencies.

E.g. of fixed exchange rate-China.

E.g. of variable exchange rate-India.