Questions and Answers
What does 'foreign exchange' refer to?
What is the foreign exchange rate?
It is a rate at which the currency of one country is converted into the currency of another country.
Define the foreign exchange market.
It is a market where national currencies are traded for another country's currency.
In a fixed exchange rate system, the rate can be changed by market forces.
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What is the gold standard system?
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What is the Bretton Woods system?
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What does a flexible exchange rate system refer to?
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Study Notes
Foreign Exchange
- Refers to all currencies from other countries, excluding the domestic currency of a specific nation.
Foreign Exchange Rate
- Represents the conversion rate between the currency of one country and that of another, facilitating international transactions.
Foreign Exchange Market
- A platform where national currencies are bought and sold, enabling global trade and investment.
Fixed Exchange Rate System
- A currency valuation method where rates are established and maintained by the government, limiting fluctuations.
Gold Standard System
- A monetary system where the value of currencies is linked to a specific amount of gold, ensuring fixed exchange rates based on gold values.
Bretton Woods System
- Established post-World War II, this system replaced gold with the US dollar, fixing other currencies to the dollar, influencing global monetary stability.
Flexible Exchange Rate System
- Exchange rate system determined by market forces of supply and demand for various currencies, allowing for fluctuations based on economic conditions.
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Description
Test your knowledge of macroeconomic concepts with these flashcards focusing on foreign exchange. Each card defines key terms that are crucial to understanding the dynamics of currency in the global market. Perfect for students preparing for exams in Class 12 Economics.
