ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An exchange rate is a rate at which one currency will be exchanged for another currency. Most exchange rates are defined as floating and will rise or fall based on the supply and demand in the market. Some exchange rates are pegged or fixed to the value of a specific country’s currency.

Detailed explanation-2: -The Real Exchange Rate is the ratio of the value of the domestic currency to the foreign currency.

Detailed explanation-3: -A direct quote is a foreign exchange rate quoted in fixed units of foreign currency in variable amounts of the domestic currency. In other words, a direct currency quote asks what amount of domestic currency is needed to buy one unit of the foreign currency-most commonly the U.S. dollar (USD) in forex markets.

Detailed explanation-4: -A foreign currency exchange rate is a price that represents how much it costs to buy the currency of one country using the currency of another country. Currency traders buy and sell currencies through forex transactions based on how they expect currency exchange rates will fluctuate.

Detailed explanation-5: -Each country tries to devalue its currency to be more competitive in terms of exports and foreign investment; this scenario is often known as a “currency war”. Overall, its economic impact is temporary and loses effectiveness when other countries implement devaluation policies. Fiscal devaluation.