ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Under flexible exchange rate regime, the rate of exchange is determined by the forces of demand and supply. In other words, the equilibrium rate of exchange occurs where demand and supply are equal to each other.

Detailed explanation-2: -In a free-floating exchange rate system, exchange rates are determined by demand and supply.

Detailed explanation-3: -In macroeconomics, a flexible exchange-rate system is a monetary system that allows the exchange rate to be determined by supply and demand. Every currency area must decide what type of exchange rate arrangement to maintain.

Detailed explanation-4: -Flexible rate of exchange is the rate which is determined by the supply-demand forces in the foreign exchange market. It is also called ‘free exchange rate’ as it is determined by the free play of supply and demand forces in the international money market.

Detailed explanation-5: -As the price of a foreign currency increases, the quantity supplied of that currency increases. Exchange rates are determined just like other prices: by the interaction of supply and demand. At the equilibrium exchange rate, the supply and demand for a currency are equal.