lnLroducLlon

W forelgn exchange raLe Lhe raLe aL whlch

W one unlL of currency of a counLry can be
W exchanged for Lhe number of unlLs of
W currency of anoLher counLry
W Lxample
W $ 1 8S30
W
SysLem of exchange raLe
,
,arkeL sLablllLy and moblllLy of
caplLal
Lncourage lnLernaLlonal
Lrade
A check
as
lnflaLlon
,acroeco
nomlc
pollcy
Avold
speculaLlon

Puge
reserves of
gold
ulscourage
venLure
caplLal
Puge gold
reserves
hlnders
movemenL of
caplLal
llxed
exchange
raLe may noL
be Lhe
equllllbrlum
raLe
@heory of deLermlnaLlon of raLe of
exchange
W @he raLe of exchange of a counLry's corrency
ls deLermlned by Lhe demand for and supply
of lLs currency
W CLher Lhlngs remalnlng consLanLlf Lhe
demand for exchange rlseslLs value wlll also
rlse and lf demand for forelgn exchange
fallslLs value wlll also fall
W CLher Lhlngs remalnlng consLanLgreaLer Lhe
supplylower Lhe raLe of exchange
uemand for forelgn exchange