--%>
Assignment Help - homework help

Freely Floating Currency

Question:

For a freely floating currency, currency i.____________________ occurs when the market value of a country's currency rises relative to the value of another country's currency, while currency ii._____________________ occurs when the market value of a country's currency declines relative to value of another country's currency. ii. Briefly Explain?

Answer:

(i)    Appreciation

(ii)   Depreciation

(iii)  Market value of a currency is determined by its demand and supply, in a free currency movement model. Therefore, given the fixed supply in the short run, a rise in value means that the demand is increasing, thereby increasing the price of the currency. This price increase, measured in terms of other currency, leads to appreciation of the currency. Opposite happens in the case of depreciation.

 

 

   Related Questions in Business Economics

  • Q : The demand curve when each of these

    What happens to the demand curve when each of these determinants changes?

    		•
  • Q : Economics chapter 1 Suppose that on the

    Suppose that on the basis of a nation's production curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9,000 pizzas. Relate this information to the following statement: "Thr

    		•
  • Q : Comparative Advantage of free trade

    According to the advocates of free trade and World Trade Organization, each and every country potentially advantages from trade liberalization and the lowering of tariffs since each and every country: (1) Has a comparative benefit in something. (2) Ga

    		•
  • Q : Utilization of resources in production

    The points on a production possibilities curve communicate to combinations of goods which: (1) Can’t be generated with no technological advances. (2) Utilize all resources fully and efficiently in the production. (3) Can be generated, however use economic capaci

    		•
  • Q : Explain the markets and prices of the

    Explain the markets and prices of the Market System?

    		•
  • Q : Illustrate Qualification in

    Illustrate Qualification in International Trade?

    		•
  • Q : Problem on utility function Matt’s life

    Matt’s life is divided into two time periods, young and old, and his utility is a function of two “goods”:  consumption when young and consumption whenever old.  Consumption when young and consumption when old are both of normal goods to Ma

    		•
  • Q : Illustrate other than price many factors

    Illustrate other than price many factors determine the outcome?

    		•
  • Q : What is an inverse relationship Briefly

    Briefly explain the use of graphs as a way to present economic relationships. What is an inverse relationship?

    		•
  • Q : Married men on average earn more income

    Studies indicate that married men on average earn more income than unmarried men of the same age?

    		•