ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The forces of supply and demand
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Government/the Federal Reserve Bank
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Whatever sellers of goods are willing to take
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Investors decide the value of the currency they wish to invest
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Detailed explanation-1: -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-2: -In a floating regime, exchange rates are generally determined by the market forces of supply and demand for foreign exchange. For many years, floating exchange rates have been the regime used by the world’s major currencies – that is, the US dollar, the euro area’s euro, the Japanese yen and the UK pound sterling.
Detailed explanation-3: -How do the forces of supply and demand determine flexible exchange rates? Certain types of currency are more expensive in relation to others, so the price of currency falls through the action of supply and demand.
Detailed explanation-4: -Interest and inflation rates. Inflation is the rate at which the cost of goods and services rises over time. Current account deficits. Government debt. Terms of trade. Economic performance. Recession. Speculation. 06-Sept-2022