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Open Economy Macroeconomics

Question
CBSEENEC12012896
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Distinguish between Fixed Exchange Rate and Flexible Exchange Rate.

Solution
Comparison. Fixed exchange rate is the rate which is officially fixed in terms of gold or any other currency by the government. It does not change with change in demand and supply of foreign currcncy. As against it, flexible exchange rate is the rate which, like price of a commodity, is determined by forces of demand and supply in the foreign exchange market. It changes according to changes in demand and supply of foreign currency. There is no government intervention.

Some More Questions From Open Economy Macroeconomics Chapter

The value of a country’s import of goods is र 200 crores, and value of export is र 250 crores. Find out its BOT. 

A country’s balance of trade is र (–) 60 crores and value of import of goods is र 100 crores. out value of export of goods. 

What is meant by balance of payment (BOP) account?
or
What does BOP account record?
or
Where are borrowings from abroad recorded and why
 

Balance of payment always balances. Comment.

When does a situation of deficit/surplus in BOP arise?
or
Explain meaning of deficit in BOP.

Distinguish between BOT and BOP. 

Distinguish between current account and capital account of BOP account. Mention any two transactions (components) of each.

State any four items of current account of BOP account.

Distinction between Balance on trade account and Balance on current account

What does a deficit in current account of BOP indicate?

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