ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -AS 11 applies to exchange differences on forward exchange contracts. The forward contracts include the ones entered into by the entity to cover the foreign currency risk. These, however, do not include the forward contracts which are undertaken for future foreign currency transactions.

Detailed explanation-2: -On the supply side, an increase in the supply of a currency will shift the supply curve to the right, ultimately creating a new intersection for supply and demand and a lower exchange rate for the currency.

Detailed explanation-3: -Changes in currency exchange rates affect international trade by increasing or decreasing exports and imports. A strong domestic currency will cause exports to decrease and imports to increase. As exchange rates decrease, exports rise and imports go down.

Detailed explanation-4: -Interest rates and inflation. Inflation and interest rates are closely related, and both affect exchange rates. Trade. A country’s trading relationship with the rest of the world can also affect its currency. Market expectations.