Balance of Payments-Foreign Exchange Rate (CBSE Class-12 Economics): Questions 13 - 18 of 18

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Question number: 13

» Balance of Payments » Foreign Exchange Rate

Essay Question▾

Describe in Detail

Explain two merits each of flexible foreign exchange rate and fixed foreign exchange rate.

Explanation

Flexible exchange rate merits are: -

(i) Eliminates the need to hold huge gold reserves: -

Exchange rate execution eliminates and holds huge gold reserves because this system exchange rate between two currencies is not fix of gold.

(ii) Eliminates the problem of over-valuation and under-valuation of currency: - Exchange… (74 more words) …

Question number: 14

» Balance of Payments » Foreign Exchange Rate

Essay Question▾

Describe in Detail

Explain two merits and two demerits of fixed foreign exchange rate.

Explanation

Two merits of fixed foreign exchange rate are given below:

(i) Promotes International Trade: Fixed exchange rate mention a stable exchange rate. Stability prevents uncertainty and promotes international trade.

(ii) Prevents Speculation: Stable exchange rate prevents speculation in foreign exchange market. So, hedging is not required.

Two demerits of fixed… (60 more words) …

Question number: 15

» Balance of Payments » Foreign Exchange Rate

Essay Question▾

Describe in Detail

Explain the meaning and two merits of fixed foreign exchange rate.

Explanation

Fixed exchange rate is rate of foreign exchange it is fixed by authority of country Merits of fixed exchange rate is given below:

(1) Avoid variation in exchange rate and exchange rate is fixed by government so the exchange rate becomes free from variations.

(2) Makes international trade more predictable… (11 more words) …

Question number: 16

» Balance of Payments » Foreign Exchange Rate

Essay Question▾

Describe in Detail

Explain two sources each of demand and supply of foreign exchange.

Explanation

Two sources of demand for foreign exchange is given below: -

(1) Import payments: - Foreign exchange is demanded for imports and it is for purchasing goods and services from world.

(2) Gifts and Grants: - other sources of demand for foreign exchange is sending gifts and grants to the… (50 more words) …

Question number: 17

» Balance of Payments » Foreign Exchange Rate

Essay Question▾

Describe in Detail

When exchange rate of foreign currency falls, its demand rises. Explain how.

Explanation

When exchange rate of foreign currency falls which means that foreign currency depreciates the demand for foreign currency increases as it becomes cheaper for the residents of the country like India for example. depreciation of foreign currency leads to increase in demand of it as exports will strike a rise.… (62 more words) …

Question number: 18

» Balance of Payments » Foreign Exchange Rate

Short Answer Question▾

Write in Short

What is fixed exchange rate System?

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