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.
"price makers" never want to produce in the inelastic part of their demand curve why
Social cost: Social cost of production refers to the cost incurred by a society when its economic resources are used to produce a given commodity. The usage of a society’s res
Explain why each of the following factors may influence the own price elasticity of demand for a commodity. (i) Consumer preferences, that is, whether consumers regard the commod
why diminish MRS?
GOVERNMENT FINANCE: UNION AND STATES: The fiscal position of the Governments - both Centre and States - has been under stress since the mid-1980s. The stress stems from the i
What is the difference between economics and business? Economics is the study of how we, the people, engage ourselves in production, distribution and consumption of goods and
What are the main weaknesses of using demand-side policies? Trade-off issues a) Growth and low unemployment often come with inflation b) Government stimulatory policies m
Some Cost Considerations for Managers * Three guidelines for estimating the marginal cost(MC): 1) Average variable cost should not be used as substitute for the marginal cost(
A farmer produces maize according to the following production function Q m = AK 1/3 L 2/3 Where Q m is output of maize, A = land, K = capital and L = labour Given that
supply and demand
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