BET_Y2_Sem2_International_Trade - TABLE OF CONTENT Title...

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TABLE OF CONTENTTitlePage1.0Question 1Explain how exchange rates are determined and discusstheir implications on international trade.12.0Question 2Discuss how central banks intervene in currency marketsand state their reasons for such actions.8Bibliography included in page 13
Question 1Explain how exchange rates are determined and discuss their implication oninternational trade.
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2.1 Floating exchange ratesFloating exchange rates are preferred by most countries because it’s the real rate thatdetermines the exchange rate between countries. This exchange rate fluctuates up anddown based on the supply and demand chain. The logic of the chain remains the samewhereas when demand increase and supply remains then price would increase. The pricehere represents the value of the currency against its competitor currencies. Anotherscenario is when the supply increases and demand remain same, the price or value woulddecrease or drop. If both of the both supply and demand increases and balanced in sameamount then the price would be same.

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Term
Spring
Professor
N/A
Tags
Exchange Rate, International Trade, Foreign exchange market

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