Explain the manner in which currency exchange rate is determined
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Currency exchange rate is determined in 3 ways
1 ) Fixed exchange rate system - In this system govt himself fixes the exchange rate.
2) flexible exchange rate system - exchange rate is determined by market forces of demand and supply.
3) managed floating exchange rate system - In this system exchange rate is detemined by market forces of demand and supply and RBI. RBI maintains high fluctuations in exchange rate to prevent losses.
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