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.
what are the microeconomic encompasses
quesinrent
law of diminishing marginal returns does not hold then output of the world can be produced in a flower pot. Explain?
how much for taking a test
Laspeyres index The Laspeyres index tells us that: - The amount of money at present year prices which an individual requires to purchase bundle of goods and services which w
#question#.problems and its solution of microecnomics
Uses and Habit Forming Commodity -price elasticity of demand: The number of possible uses : A commodity has high price elasticity of demand (or elastic demand) if it can be p
Ask questi‘Social welfare functions embody a normative conception of the relative importance of equity and efficiency’. With the aid of diagrams, illustrate and explain this propos
National Income Determination: National Income Determination deals with what determines the size of a nation’s national income. The size of a nation’s national income is deter
Q. Define Regressive Tax? Regressive Tax: A tax in that lower-income individuals or households bear a proportionately greater burden of the tax. Sales taxes aretypically consid
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