6.2.2 - Determination of the Exchange Rate
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Practice Questions
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What defines a Flexible Exchange Rate system?
💡 Hint: Think about who controls the rate.
What does depreciation mean?
💡 Hint: Consider how it affects purchasing power.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What determines a Flexible Exchange Rate?
💡 Hint: Think about how prices are set in a free market.
True or False: Depreciation means a currency becomes more valuable.
💡 Hint: What happens to your purchasing power?
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Challenge Problems
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Assume that the demand for dollars shifts significantly due to increasing foreign investments in the U.S. Explain how this change affects the Indian Rupee.
💡 Hint: Consider what happens during heightened interest in foreign investments.
Analyze the consequences of a government intervention reducing the exchange rate in a Fixed Exchange Rate system.
💡 Hint: What are the long-term effects of sustained intervention?
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