BALANCU OF PAYIMIEN TS

balan c paynuls au annual sLaurnunl 4

dLls monclwns aansalons o L Ly
and c usl d le w0ald
xchange hale 1 h puto al wmth soms,
OeLqu (uLicnlu Cau be exhaUgd LO

xhavnqe a s k uu ho0.u a
Lgu Cuaeiy thal c be punchas n
tr cha ngid aghivnst a uwut o domish

1 4 13:3

FoREIGIN xCHANGAE 11ARKEL

1t a n arsangtnhent wheru by_buyers and
elleas d paoigw nseezies Lome lpgctnu_to lo
tiansat pheUgh wsnenaes kee png_Whei selk
teaest DWsLdLrahon

Funchons oFoeuqn lxchang Maahul

Thansn fundaoh
1 ALks laanspalnq_powvs Vested u
the loiugn dnowe wveniy dwDung he
ouitm whth are brddiuiq udb &au otlher
Csdil luuchon
fOAug lachange Maihet_provjelis Caedit
foruan biNsactions
 Hedgng 1unchon
1 mplues lhat poledon aganst lh u h
Conccauug_vanialion u etgu nthamg HAL
1 may be scen as a sefd, of seltih4 aaa
escuble wcses m casc d ulurt oulaaLL:huy
Onmmtlle d at somi COmmovnuy a q a
Cyn when Omnutmont
ae lo Onoud on somi laten dato u ulue2
O n ta ollha hand 2poates and umpostins
uulually agace Lo bul_0 sell goods ou
uluae dau_al thu puValuug_psules
YPES OE EXCHANGE HA1ES

SL4sLLLm
Fized Exchang hatz
Fleubu lxchange hatz
3 anuqLd floalung Exchange Rate

1FizLd Lxchange Kale

O Cnthal banh a uuaLaej

hisL _aAL wo melnouds pa detimnu thhe
enthange Aate und this system

iGrold standard Systet Enchanqe Aat

4e tu uad At uwOsld aA. Auosdug lo.
wws systw_god ws takeh as ne ommon
wnn d panilj beluwecn uuAunuls deernt
Lounlsus
 Date:

i adceocd sysl cin dfxthaug

Undia Lat ysl im Oun S_wOL
hy agaunst US doll.
Aquusid k x lhin urse
cnd d woah I IMELInterr
A W
MOnelosd und| was sel up wn' 1q/45 wuth b
uhbeAS dellinq up tlat e d evnange
7

Advantaqes d Fixed Exchanqe hale 8u8tu

I E thsuit stablily w exchangu Aute
1 piomous_capitul movemLnt_
bLcaS doesnot wvolvt any_unlstamin
a a n e about ednang Aat
1 SLpps Speculahon w_pruuGn ezdnang
Lahet
4hulp Whe goveanmeut tw Chich wulahon
OA deklähon fosL clcuulahon
Vuadvantages /Demesils
1 t ALquiks hiah AeserVe d gold
Ducouraqp _obechvs o w maAhet
14lahon Delahon pate o duhhent
(ounbAsd l s stgwpcamiy ds a aes ALS ult
ult
hulatuMe PhMe biwen these wuntrw wold
kep Rlucuahng.6
Som COnntAMU Wat devaluale /Pevalue
h u uANLk IME did not peumt u as ts
result_the susbem nally collLapscd
 [lexiblc Lxchdnge hale
ndu lhus alt de xthaug
hy t delenhaiMrd by de manl lpi
and
edaan maihtt his u huoum asmahet

KCMavnq
1h (xihange haleoh demand or loALLa
iAau cQLCLL_lo sLpply alltd
Cauhbnulm hate o ezchainau O_pO ae
ale
ezChavngt
Advantaqus o lenublenchangc Raa Sqsben
yWndorn syStenn ALdued bavis OnL
Sadi and tupvkal moveme ni amonng nahons
onch sSulted ui qmalti dignw alobaltahoh
No Acquirement bo hald uwteavahbnalL
AseHvesby tiu wwthal banh o the ounlaies
uCnomy: hy achuivund ophmuM alucahoud
el nate teu _phoblm o_ovevaluahon
Ofv ndis valuuhon_ wnny
DAadvOMkages/Dimeste
t crLais mawhtt nstabiy
ownages pedaabn
1_diLouillgcs htimalonal baade und
VLstmim
 Managcd 7 tloalin4 xdnavnqe hal

exhan4c maiht neely by h hmanh

pacigu
dmamd and SuppliyiHowere
5.us 6 dhechad by entnal bauk
xassv luc lual1o
It also called dintiy loalm
govt

DETE RMINA1ION OF FOBEIGIN EXCHANG AIE Sy8TEM

OsLqa £auhanqt dilonminztl by
dimand aud suppy

R=f(D,s)

Demavnd lo fosuLqu Ernange

Fatoss aluhng dumand,D OALLgw tnihd
mpoat dgocads anáScvUs
when ludia iuplits 4O0ds aud SchVL
5.Om hOn has to haake ne atmiht
Lihms d J0seugu ulaieniy
1ndiaw Touansgoun4aba0ad
y nud lo have 0ietg Crnavnge
wa wn them to muut lhe expetadilti e
aboaad
4Bemullane by foignens hloikuug u ndi
nconme undia to Send tus naone
bath lo thtia {amulies hy wOul d
dumaua pAetgh xhauge
Remeltaniu by Mullu Nahonal aud
fOnLqn Tnshulio nab 9nveslys |FI1
 papergrid
Date:

n even mullualonal o4 S tarw

u pACN 0 dividend huy seud it back to
_ h o n u cOucmd gwiug nAs 0 demand
ictgh (acnavnge.
pay mint o1ulchest and loans
Wncn we have o pay untthest and Aply
T
he loans loAeAqu ludens ue would
Akquii oiequ tzthang
wece helahons eri5b behown damand pa
i g erhange and_pnulu 4_lpnugu
Aavnqe ie_A_a huhlher pale less d he
khiuqu rhavnge dimandid: and viu-vesa
Sutipose pruie g ddlas goes -up,al
wwpon ed goods beuomu ost kpi us ui teems
uppeeWe wl demand uss d these gcodi
indni's dumund lps dolLan fallsa_
60

H
30F
a0
10H

e abaN diayaam sheos hat he ezihaug

&a 60 p Aclar e depauahh 4
Adiam unau Dmana 0 Ohtlqu CZiha
 M. . cr thange rale a l lo 40_R
olt ai and 1 O pco dola
ar, w duaaud
-

nspaliicly

Suprl d 10stgu zdhange

Tacos AKuq 8uppl 0Lgu adhaugg
p oals g oods and gervicL
whenua the Diugne_pncnase oun
0ods aud SerViles we ar paLa ww ouug
zhavng heai by_wikeasÜng he sUppl
OLLgw enlnange w lndia"s_ugw
manhet.
* fOALgu Towmst ndua
hey a supposed o qet iren ome dune
urrenuy onwenled mto lndnam uYeny
LAansat w ndna whèch mhnances the
J0ruigw tanaMge Ou 0unba
Puimtatnds by lndians woskung abaoad
1hdnaM_wORhLiswho aie woihing
absoad end back huA 6avungs lo thua
amuuws_ lndia hadng to mchease un
uppl o foergw erduauge w Andias
phengn erchange marhet
fOALg dualc wweslmeul bu MNCS
westvmunt by au MAC Adsulte w o
oReugin entnange b_lndia. hu's
Ow he mau Ärasous belmnd
Make ludia Wmcw sautse Sell w
evn wi tn o0sld but prcite i Tudi
 **

Sundasly auy
msnluhdnal
Pcscuas oslvhs by nnctqh
tnicslyss al lu Mduan slpch havn
oreugu exthage mlo
.esulls t Kow
Judia slreh Manhets
*Veposils hy Nou lies1deut Tudnaw
1 also, a 2 Lmeadva nespthsible
c u exchaugeouws iw u
&ndiau re n Exchange Mashed
hcct helaloushp belween supply d01014
C2chdung and Pa alougu 'ezihaugi
he value h oitgn tacnan4L Gos up
n Quaully SLuppluecl _paugn endhange wi
al50 go_up ana Vile-versa
S

30

30

M2
PMte
Faem above duanan Lathdauge
iLLgh
lsake io2a0 aud supply loscLgla izhaaqk
M 1 erdnange Aatu AsLs 30. O E0
tia supplh d onsgu eatkhauy dL MtLas
M, huspicluely
 UI) hAJE
IXCHANGL
iL
equlibsum (ze haug
1ult csl ablshud
reut( hiu, qLiaUiliy Atmahd n d quauh
xtge ate tqual
Syg k
/t

M M Ma

Qlay cCurtanay/Foreug n Ercauge

Ahe akove draqram sepsasewt negawely

sLopd demand ciuwe and pos uv ely slöpcd
Suupplyi v e o0sugw
a exchauge. both u
uvsntasu at poinb E shows
LQmlubsU_pOA_and OB y he equiubiun
4 d enuhauqAMKI Aulubauum Guauhh
EDALIgw ezuhaige dumandid and
shppued n dhe onuign enehauqemanheb
AL C ughen. p4ile 04 hughea Aate cl
endnang muu wul be aneNUSS Supp
okuLgu enchange maiket: Tms'" he
w bosn doon ho pAAle 0s encnaMge
Apw w Lend apprt aate), turs Rl enLALSe
O ne. olls and ih w Rato u lower
eaulubaum pe o rihauge aate wi
 ctetit1 tetsc
v2tct papergrid
Date:

w
sc_xess demaud OMa
echaugc( uduan Aupe unll le dyru cLale
Imralaul ltMs
sD ualon 1 t is he al i hu
CLFYCnUy w aulahon o 0nuugn value dOmi stl.
1 _planned by goveÄnmant urenuy
and t 0? Lhntal bankK
don m a ted ennange tatu
Sustem
huvalua hon is he Mse mh
elomeshc CuLrrLnu_mMlanovvalu o_
to {onuigh
Curvhy as plannid by
ehtaa bank 1 govou menb on
dont m ed tnchange
au sysm_
Depsu anon 1t Aes lo ditease m valuu
domesh wrriny m Leam
oLlQh
uAuny ILake_plad undu hi u{uunl
hange m demandand nanges M
Supp Cwiicu t_oCA w å ezible
enthänd Aate syatem
Appheuahon t- Aelvus lo_use w valuu ac
domeslu wrvinu beams 4oseug
uur r u A_O s n a leb u ot
loatm caehauge Aale syatem
CausLs_o DepaLLahon 0% hst Exchange Rate

tDetea5L 6upp pa 0acLgu Ezihauig4¢

oaalsne ottns tmats-LEnstant
 6uppu hcmam as Onslavnl
Nu tguuli baum pOmt 1
zchang Aale hu'stseOm OB O t shows
dupicahon durreny}

)DLCKease wSupp

1 u u p p y uve su bo Aetss to S61 du

o detrease um supp
Demand o lohuugu endhauge nemam constan
Weuw quubiuum pomt E
nunang naM mit om OR Oh d e show
dephuuabon o uruhuyl
 Date: /

Cause
Apprectahon
a Decat ASC[all m
on tall n Exhange
Ha
demand p Atigh ure

Demand aurve sut lo DD LD DD

Nw equlubaum pomt 21
nanqu sat lals aom OR v OR
b)se he uppy_loi konugm utreua

Suppu Cwve shult w ss o S$1

C
Ns ègukbaum pout EL
-enchaiugg Aatu Jalu om OR to OR