1.

Differentiate between fixed and flexible exchange rates.

Answer»

Distinction between Fixed Exchange Rate and flexible Exchange Rate.

Fixed Exchange RateFlexible Exchange Rate
1. It is decided and declared by the government and it is kept stable.1. It is determined by demand and supply forces in international market.
2. In this system, the central bank becomes ready to buy or sell its currencies at a fixed rate 2. Exchange rate is freely dependent on the working of foreign exchange market and the central bank has nothing to do with it
3. No fluctuation takes place3. Fluctuations ppear.



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