ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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are set daily by the Fed
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are an established by an agreement of two nations
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values are determined by supply and demand
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are a result of bilateral agreements
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Detailed explanation-1: -Floating exchange rates work through an open market system in which the price is driven by speculation and the forces of supply and demand. Under this system, increased supply but lower demand means that the price of a currency pair will fall; while increased demand and lower supply means that the price will rise.
Detailed explanation-2: -In a floating regime, exchange rates are generally determined by the market forces of supply and demand for foreign exchange.
Detailed explanation-3: -A floating exchange rate is determined by the private market through supply and demand. A fixed, or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange rate. The reasons to peg a currency are linked to stability.
Detailed explanation-4: -A floating rate is determined by the open market through supply and demand on global currency markets. Therefore, if the demand for the currency is high, the value will increase. If demand is low, this will drive that currency price lower.
Detailed explanation-5: -The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline.