Question

What is the rate of exchange and how the rate of foreign exchange of a countryt is determined ?

Answer 1

Exchange rate refers to the rate at which the currency is exchanged.

Exchange rate of a country is determined by following three systems

1. Fixed exchange Rate system: In this system exchange rate is fixed by the government.

2. Floating exchange rate: In this system exchange rate is determine by the market forces of demand and supply.

3. Managed floating Exchange Rate System:  In this system Exchange rate is determined by government as well as market forces of demand and supply.
It is a hybrid of Fixed and Floating exchange rate.
It is also known as Dirty Floating