Chapter 4: Exchange Rate

What is exchange rate?

An exchange rate  between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency.

Exchange rate regime

It can be Fixed exchange rate regime or Floating exchange rate regime.

In Fixed rate regime, exchange rate is determined by central bank of country whereas Floating rate is based on market demand and supply of currency.

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