Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Equilibrium Exchange Rate:
The theory of exchange rate determination explains how demand and supply of foreignexchange interact and jointly determine the equilibrium exchange rate.
As seen earlier, the demand schedule for Indian rupees (or supply schedule of foreigncurrency) arises from the foreign demand for Indian exports. Similarly, the supplyschedule of Indian rupees (or demand schedule for foreign currency) arises from theIndian demand for foreign goods or imports. Together, they determine the equilibriumexchange rate (R*)Suppose there is an exogenous increase in income in the US and therefore an increasein demand for Indian goods. Correspondingly, the demand schedule for Indian rupeesshifts to D1. The resultant equilibrium exchange rate (R*1 ) indicatesthat the Rupee has appreciated against the dollar.
Similarly, if Indian imports increase(relative to the exports) then the supply curve (SRs) shifts to the right resulting in the depreciation of Indian rupee from R2 to (R*1).Thus, in a flexible exchange rate regime, market demand for and supply of a country'scurrency determines the changes in exchange rate. As the demand and supply schedules for currency are determined by many forces, there would be a tendency for high volatilityof exchange rates in this regime. As there would be no intervention by the CentralBank in determining the exchange rate, the BoP will always be in equilibrium. It meansthat the exchange rate adjusts to make the balances in current and capital accounts sumto zero.
Durability of the Commodity: With some commodities, we require one at a time and they are used for a very long time before they get spoilt. Examples of such goods are cars, tele
Internal and external economies of scale: Internal economies of scale are the advantages or benefits that the firm enjoys as it expands its size or increases its scale of ope
Low standards of living: In developing nations general standards of living tend to be very low for the vast majority of the people. These low standards of living are manifest
Problem 1: (a) Critically examine the differences between the Neo-classical growth models and the endogenous growth theory. (b) Show the relevance of such models in explain
economists would predict that if salaries increased for engginieers and decreasded for mba braduates that fewer people would go to graduate school in business and more would go in
What is the theory of absolute and comparative advantage?
Money: Broadly speaking, money is anything which can be used as a means of payment (for instance, to settle a debt). It includes bank deposits, actual currency, credit cards and li
Problem: a) What factors would you consider when analysing the digital economy relative to e business? b) "The growing use of the internet by consumers and businesses has re
Define law of supply. Quantity supplied rises as price raises, other things constant. In other words, "Other things being equivalent, when the price of a product rises, then s
explain stages and various coordination mechanism involved in policy process
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd