Question

What are fixed and flexible exchange rates? ​

Answer 1

Answer:

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Explanation:

• A fixed exchange rate denotes a nominal exchange rate that is set firmly by the monetary authority with respect to a foreign currency or a basket of foreign currencies. By contrast, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.

• A flexible exchange-rate system is a monetary system that allows the exchange rate to be determined by supply and demand.

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Answer 2

$\huge\mathbb\red{QUESTION}$

•What are fixed and flexible exchange rates?

$\huge\mathbb\red{ANSWER}$

Fixed Exchange Rates :

➣The fixed exchange rate is officially fixed by the government or a competent authority, not by the market forces.

➣ In fixed exchange rate wherein the government and central bank attempts to keep the value of the currency is fixed against the value of other currencies.

➣ The value of each currency was set in terms of gold and exchange rate was fixed according to the gold value of currencies that have to be exchanged.

➣ For example in India, a currency price is fixed an official price of its currency in reserve is issued by the central bank.

➣ Once the rate determined, the central bank undertakes to buy and sell foreign exchange and the private purchase and sales are postponed.

➣ An apex bank changes the exchange rate if needed.

Flexible Exchange Rate :

➣ A flexible exchange rate is also known as a floating exchange rate.

➣ In a flexible exchange rate, a rate is set according to the demand and supply of market forces.

➣ A country's economic situation will determine the market demand and supply of its currency.

➣ It is particularly determined concerning other currency it means higher the demand of particular currency, the higher it's exchange rate.

➣ If an economy is strong the flexible exchange rate is higher and vice a versa. So the government has no control over the flexible exchange rate.

➣ A value of the currency is fluctuated or shift freely according to the demand and supply of international exchange.

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