Chapter 6 Part 1 - Foreign Exchange Rates
What causes Demand of Foreign Exchange?
What causes Supply of Foreign Exchange?
What are Different Methods of Determining Exchange Rate?
Flexible or Floating Exchange Rate
Appreciation and Depreciation of Domestic Currency
What are the Factors Affecting Exchange Rate under Flexible Rate System?
What is Effect of income on Exchange Rates? You are here
How does Speculation affects Exchange Rates?
What is the Effect of interest Rates on Exchange Rates?
What is Purchasing Power Parity theory?
Summary of Flexible or Floating Exchange Rate System
Fixed Exchange Rate System
What is Pegging and Parity Value in Fixed Exchange Rate System?
What is Managed Floating Exchange Rate System?
What is Nominal Exchange Rate?
Rise in Price of Foreign Exchange is good or bad for economy
What is Bretten Woods System(1944-1971)
Different Functions and Kinds of Foreign Exchange Market
Chapter 6 Part 1 - Foreign Exchange Rates
Last updated at April 16, 2024 by Teachoo
When Income of Country Increases
People spend more and Purchase more goods
Hence, they purchase imported goods also more
This leads to increase in Import
Due to this, demand for foreign currency exceeds
This leads to depreciation of domestic currency
Hence, Demand for foreign currency exceeds as compared to supply curve
Effect of Income on Exchange Rate If Income Is low Customer spend less (Low purchasing power) They Purchase less Imported Goods Less Demand for Foreign Exchange Decrease in Rate of Foreign Currency Appreciation of Domestic Currency If Income Is High Customer spend more (More Purchasing Power) They Purchase more Imported Goods More Demand for Foreign Exchange Increase in Rate of Foreign Currency Depreciation of Domestic Currency
