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Foreign Exchange Rate:, , Foreign exchange rate refers to the rate at which one unit of domestic, currency is exchanged with the number of units of currency of another, country., , The price of one currency in terms of other currency is known as foreign, exchange rate or exchange rate., , E.g. = 60 are to be paid to buy one dollar, then exchange rate is $ 1 = % 60, (written as = /$ exchange rate)
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Types of Exchange Rate:, e There are three types of exchange rates:, , [tees of Exchange rate |, , , , Fixed Exchange
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Fixed Exchange Rate System:, , e@ Exchange rate is determined by the Central Bank of a country, and the changes can be made by the Central Bank only., , e There are two methods to determine exchange rate under this to det., , system:, > Gold standard system, , > The Bretton Woods System of exchange rate
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Fixed Exchange Rate System:, Gold standard system of exchange rate:, , 1., , According to this system, gold was taken as the common, unit of parity between currencies of different countries in, circulation., , Each country was to define the value of its currency in, terms of gold. Accordingly, value of one currency in terms, of the other currency was fixed, considering gold value of, each currency.
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Fixed Exchange Rate System:, 2. The Bretton Woods System of exchange rate:, , The Bretton Woods Conference held in 1944, re-established a, system of fixed exchange rates., , This was different from the international gold standard in the, choice of the asset in which national currencies would be, convertible., , Under this system, countries were required to fix their currency, against US dollar., , International Monetary Fund was delegated with supervisory, role under this system.