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Chapter 33: Q. 33.3LO (page 732)

Outline how exchange rates are determined in the markets for foreign exchange and discuss factors that can induce changes in equilibrium exchange rates

Short Answer

Expert verified

Currency exchange marketplaces constitute World's largest stock activity of total worth, with vast sums transacted and issued on either a routine basis.

Step by step solution

01

Introduction

The transfer among one cash to the other is referred as exchange rates (forex or FX). Somebody can, for illustration, trade the US currency for such euro. Its currency market, sometimes abbreviated as currency markets, would be where forex operations can really be done.

02

Given Information

Consumption controls the price from most governments, frequently referred as both the Canadian dollar.

03

Explanation

Transferring one coin for those at a financial institution could be as simple than that. This may also incorporate stock markets on the exchange market. Sometimes in scenarios, a merchant has investing that perhaps a reserve bank will ease or limit the economic system, and also that some exchanging could advance against someone else.

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Most popular questions from this chapter

Suppose that initially in Figure 33-8, the market for Bahrain's currency, the dinar, is in equilibrium at point E1. Now, however, an increase in the U.S. real interest rate has occurred even as real interest rates in Bahrain and elsewhere in the world either have declined or have remained unchanged. What must Bahrain's central bank do, and why, if it wishes to maintain a fixed exchange rate?

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