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Open Economy Macroeconomics — Economics STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEconomicsOpen Economy Macroeconomics3 Marks
Question
How is exchange rate determined in the foreign exchange market? Explain.
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Answer

It is determined by the forces of demand and supply of foreign exchange. The price and demand for foreign exchange are inversely related and supply and price of foreign exchange are directly related. The price at which demand and supply are equal is the price determined by the market.

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