Check sibling questions

It is a system where

Exchange Rate is determined by Market Forces of Demand and Supply

In this case, Central Bank does not intervene (interfere) in determining exchange rate

 

How is Foreign Exchange Rate Determined?

It is Determined at a Point where Demand and Supply Curve Intersect each other

What is Flexible or Floating Exchange Rate - Teachoo.JPG

Schedule Representation of Flexible (Floating Exchange Rate) - Teachoo.JPG

Graph Representation of Flexible (Floating Exchange Rate) - Teachoo.JPG

Note

In Flexible Exchange Rate,

There is appreciation and depreciation of domestic currency

Lets learn more about it in next page

 

NCERT Questions

No questions in this part

Other Books

Question 1

In the following questions, select the correct answers:

Flexible exchange rate system is also known as :

  1. Pegged Exchange rate system
  2. Dirty Floating
  3. Floating exchange rate system
  4. Both B and C
View Answer

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Transcript

What is Flexible or Floating Exchange Rate Year 2020 2021 2022 Exchange Rate 70 75 80 In this case, Exchange Rate is determined by forces of Demand and Supply Demand of Foreign Exchange Supply of Foreign Exchange More the Exchange Rate Less the Foreign Exchange Demand (it is Inversely Proportional) More the Exchange Rate More the Foreign Exchange Supply (it is Directly Proportional) Schedule Representation of Flexible (Floating Exchange Rate) Foreign Exchange Rate 70 71 72 73 Foreign Exchange Demand 900 800 700 600 Foreign Exchange Supply 500 600 700 800 This Decreases with Increase in Rate This Increases with Increase in Rate Here Demand=Supply This is how Foreign Exchange Rate Determined Graph Representation of Flexible (Floating Exchange Rate) This is Exchange Rate Graph On X Axis, we show Foreign Exchange Rate On Y Axis, we show Foreign Exchange Demand/ Supply Demand Curve has Downward Slope But Supply Curve has Upward Slope At Point of Intersection of Supply Curve and Demand Curve Exchange Rate is Determined

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CA Maninder Singh is a Chartered Accountant for the past 12 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.