Question

Which of the following factors influence exchange rate? Who is president Population of a country Trading partners An active war

Answer 1

Concept: Factors that influence the exchange rate and details about the global trading partners.

Given: Question

Find The factors that influence the exchange rate and the President of a country.

Solution: Factors that influence the exchange ratio are as under :

• Inflation is one of the greatest factors that influence the exchange rate because of the difference in purchasing power of different countries.

• Government Intervention plays a big role as the government can manipulate the exchange rates to stabilize the exchange rates/

• Speculation by the traders is another factor that affects the exchange rates. This happens because of the trader's speculations and sometimes either overconfidence or underestimation of the economic situation.

• Public debts are one factor that can influence the exchange rate because they can hinder foreign investment.

• Interest Rates can affect when the currency rates remain higher for a long period.

• Economic Growth is an important factor because if the economy of a country is high then, foreign exchange is possible which can affect inflation.

Hence, we can understand the main factors that influence the exchange rates.

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Answer 2

Answer:

Inflation exists as a decline in the purchasing power of money, reflected in a general growth in the prices of goods and services in an economy.

Explanation:

Inflation exists as a decline in the purchasing power of money, reflected in a general growth in the prices of goods and services in an economy.

Inflation exists as the percentage difference in the value of the Wholesale Price Index (WPI) on a year-on-year basis. It effectively estimates the change in the prices of a basket of goods and services in a year. In India, inflation is computed by taking the WPI as the base.

• Inflation is one of the greatest aspects that affect the exchange rate because of the disparity in purchasing power of different countries.
• Government Intervention recreates a big role as the government can control the exchange rates to stabilize the exchange rates/
• Speculation by the traders stands as another factor that influences the exchange rates. This occurs because of the trader's speculations and sometimes either overconfidence or minimization of the economic situation.

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