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Difference Between flexible rate and fixed rate of foreign exchange ?
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Difference Between flexible rate and fixed rate of foreign exchange ?
The following points are noteworthy so far as the difference between fixed and flexible exchange rates is concerned:
- The exchange rate which the government sets and maintains at the same level is called fixed exchange rate. The exchange rate that variates with the variation in market forces is called flexible exchange rate.
- The fixed exchange rate is determined by government or the central bank of the country. On the other hand, the flexible exchange rate is fixed by demand and supply forces.
- In fixed exchange rate regime, a reduction in the par value of the currency is termed as devaluation and a rise as the revaluation. On the other hand, in the flexible exchange rate system, the decrease in currency price is regarded as depreciation and increase, as appreciation.
- Speculation is common in the flexible exchange rate. Conversely, in the case of fixed exchange rate speculation takes place when there is a rumour about change in government policy.
- In fixed exchange rate, the self-adjusting mechanism operates through variation in the supply of money, domestic interest rate and price. As opposed to the flexible exchange rate that operates to remove external instability by the change in forex rate.
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Difference Between flexible rate and fixed rate of foreign exchange ?
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Difference Between flexible rate and fixed rate of foreign exchange ? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Difference Between flexible rate and fixed rate of foreign exchange ? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Difference Between flexible rate and fixed rate of foreign exchange ?.
Difference Between flexible rate and fixed rate of foreign exchange ? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Difference Between flexible rate and fixed rate of foreign exchange ? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Difference Between flexible rate and fixed rate of foreign exchange ?.
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