Class 12 Economics Important Chapter 7 Foreign Exchange Rate Solutions English Medium As Per The New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 12 Economics Important Solutions in English and select need one. AHSEC Class 12 Economics Additional Notes Download PDF. HS 2nd Year Economics Additional Solutions.
Class 12 Economics Important Chapter 7 Foreign Exchange Rate
Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 12 Economics Additional Question Answer are part of All Subject Solutions. Here we have given HS 2nd Year Economics Important Solutions English Medium for All Chapters, You can practice these here.
Foreign Exchange Rate
Chapter: 7
| PART – A: INTRODUCTORY MICROECONOMICS |
| IMPORTANT QUESTION AND ANSWER |
Short Questions answers:
1. What is an open economy?
Ans: An economy that trades goods, services, and financial assets with other countries.
2. How do imports affect aggregate demand?
Ans: They act as a leakage from the circular flow, reducing aggregate demand.
3. How do exports affect aggregate demand?
Ans: They act as an injection into the circular flow, increasing aggregate demand.
4. What is foreign exchange?
Ans: All currencies other than the domestic currency (e.g., for India: USD, GBP, Dinar, etc.).
5. Define the foreign exchange rate.
Ans: The price of one currency in terms of another (e.g., $1 = ₹80).
6. What is the nominal exchange rate?
Ans: The money price between two currencies without adjusting for price levels.
7. What is the real exchange rate (idea only)?
Ans: A measure of foreign prices relative to domestic prices in the same currency (≈ e × P* / P).
8. What does NEER stand for?
Ans: Nominal Effective Exchange Rate—average currency strength vs trading partners without price adjustment.
9. What does REER stand for?
Ans: Real Effective Exchange Rate—NEER adjusted for relative price levels.
10. Define currency depreciation.
Ans: Market-driven fall in domestic currency value under flexible rates.
11. Define currency appreciation.
Ans: Market-driven rise in domestic currency value under flexible rates.
12. Define devaluation.
Ans: Official reduction in the currency’s value under a fixed exchange-rate system.
13. Define revaluation.
Ans: Official increase in the currency’s value under a fixed exchange-rate system.
14. Name two segments of the foreign exchange market.
Ans: Spot market and forward market.
15. What is managed floating?
Ans: A regime where exchange rates float daily but the central bank intervenes to limit excessive movements.
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