In simple words, we can say that the price of one currency in terms of other currency is known as foreign exchange rate or exchange rate. This study resource possesses deep knowledge and the Solutions collated by the subject matter experts are no different. Forex rate or foreign exchange rate is the cost price of one currency in terms of another currency. Determination of flexible exchange rate (d) Foreign banks issue letter of credit in large demand over banks of the country: 5. 2. Nominal exchange rate is the price of one currency in terms of another. Under the fixed exchange rate system, countries maintain official reserves that allow them to have Balance of Payments disequilibrium, without adjusting the exchange rate. Foreign exchange rate class 12 - Depreciation and Appreciation of currencies, determinants of forex rate and foreign exchange markets. [CBSE 2008] Answer: Flexible exchange rate system refers to a system in which the exchange rate of different currencies is determined by the forces of demand and supply in foreign exchange market. What is meant by foreign exchange market? Answer: Foreign exchange is referred to as the conversion of a currency into another at a specific rate. Class 12 Economics Macro Notes Chapter 5 Bop Foreign Exchange Rate. Questions of NCERT TEXTBOOK also discussed with explanations. The supply curve SS is upward sloping which shows the positive development of rate of exchange and supply of foreign currency. The rate at which currency is exchanged for another currency is an exchange currency. All exercise questions with solutions to help you to revise complete syllabus and score more marks in your examinations. Download CBSE Class 12 Economics Foriegn Exchange Rates NCERT Book and other CBSE KVS Other Subjects latest books free in pdf format chapter wise, CBSE Class 12 Economics-Foriegn Exchange Rates. For example, suppose the rupee-dollar exchange rate (price of dollars in terms of rupees) rises from say, from $1= Rs 50 to $1= Rs 52. Let us assume that there are two countries – India and U.S.A – and the exchange rate of their currencies i.e., rupee and dollar is to be determined. 7. Bilateral Nominal Exchange Rate The exchange rate is the price of one currency expressed in terms of another currency Two conventions E: Price of home currency in terms of foreign currency R: Price of foreign currency in terms of home currency E = 1 / R 4. Foreign exchange refers to all the currencies of the rest of the world other than the domestic currency of the country. In favour of foreign exchange rate (e) Forces of demand and supply in foreign exchange markets. The rate at which one currency is exchanged for another is called Foreign Exchange Rate. Real exchange rate is the ratio of foreign … Multiple Choice Questions and Answers (MCQs) on Foreign Exchange Rate System of India For Civil Services Question 1 : Who maintains the foreign exchange reserves in India ? As a result, the domestic country receives more foreign currency and its supply rises. Real exchange rate is the ratio of foreign … Purchase of foreign exchange; Question 6. III. Fun Fact A Bill of Exchange can be issued by an individual or a bank. For instance, if a country runs a deficit on the overall balance, the central bank of the country can supply foreign exchanges out of its reserve holdings. (Image to be added soon) Please refer to the attached file to access the chapters. The entire NCERT textbook questions have been solved by best teachers for you. 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