Flexible Exchange Rate(in detail) Video Lecture | Macroeconomics- Learning and Analysis

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scholars learning and enjoy in this
video we will be studying about the
flexible exchange rate system in the
previous video started about the fixed
exchange rate systems and in this will
be starting about the flexible now what
does flexible means flexible means that
this it can easily be changed it can go
up but you go down
so if flexible exchange rate is that
exchange rate which is determined by the
demand for and supply of different
currencies in the foreign exchange
market so it is determined by the market
forces same way the price of the
commodity was decided due to the demand
supply of the commodity in the microwave
comics of the same way the flexible
exchange rate is due to Mike by the
demand and supply of the currents in the
foreign exchange market the market where
foreign currencies are demanded and
supplied is called foreign exchange
market so we can write it down as
flexible exchange rate it is that rate
which is due to my
but demand for and supply of different
currencies
in the foreign exchange
now what is foreign exchange market it
is a market where the forum tenants is
an important slide
and demanded and supplied so exchange
rate is the functional demand and supply
of the foreign currencies right see you
at demand of foreign currencies equal to
the supply of one currency it is an also
monastic high rate of exchange and it
constitutes namu theta equilibrium rate
the rate at the rate which we will get
will be the equilibrium they now why are
we parted as a flexible rate of exchange
because with the change in demand supply
there will be change in
the rate of exchange the exchange rate
will change if there is change in the
department supply the merits and
demerits of flexible exchange rate
system see of merits are number one you
know that gold reserves are not required
as the flexible rate is determined by
the market forces of demand and supply
of the foreign currencies so gold
reserves are not required in the system
the second is the international mobility
of capital
now see the flexible exchange rate
encourages the mobility of capital
across regions this is due to the fact
that the member countries are no longer
required to keep huge international
reserves so there is an international
mobility capital of capital which means
the countries can invest into the other
countries so there are within mobility
of capital which means if foreign
exchange we go from one country to the
other country easily thirdly we have
optimum resource allocation so if your
foreign exchange is flexible you will be
allocating here for I am currency two
differences accordingly where you get
the maximum profit so you are using your
resources efficiently and effectively
when checkout
yet flexible rate from most red chicken
in the foreign exchange market trading
it into fashion cannot see themselves
become an important economic activity so
what happens if there is flexible
exchange rate if it trade up in the
foreign currencies you know about the
share market there's also forex market
similarly as the booty market so in
forex market the foreign currencies are
traded due to the flexible exchange rate
so if you screw to the venture capitals
now the email song is your market if the
stupidity see simple exchange rate means
you see that the Wow one dollar is equal
to sixty four point six rupees today and
one bother is sixty five point five so
this is very flexible
alright this exchange rate is very
flexible so this gives the investors a
higher factor so this form of the market
instead is policy formulation we cannot
difficult
the if your foreign exchange rate is not
still keeps on fluctuating and bring
with it then the how will you for me for
us is the policy formations become very
activity market by an angel trade
agreements becomes difficult
let's improve if you have purchased a
machine from USA and that day you need
to pay 64.6 you please one money wisdom
but when you have to make the payment
the US dollar now happen seventy two
point five zero which means the time to
order for the machinery you need to flip
this but now the machine is delivered to
you on the pavement date yeah you have
to make this rupee we make one white
collar and suppose the machine reads for
$200 so now you think that the person
who will buy loss because he has to pay
six six are approximately six rupees
extra
so everything's so bilateral trade
agreements becomes difficult I hope you
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