Currency exchange rates are primarily determined by supply and demand dynamics in the foreign exchange market, influenced by trade flows (demand for G&S) and capital flows (affected by stability, investment outlook, etc.).
Consider the following statements: The price of any currency in international market is decided by the I. World Bank. II. demand for goods/services provided by the country concerned. III. stability of the government of the concerned country. IV. economic potential of the country in Q. Of these statements:
Asked in UPPCS Prelims 1998 · Topic: Foreign Exchange Market and Exchange Rate Determination (Factors Influencing Exchange Rate Movements: Interest Rates, Inflation, Trade Balance, Capital Flows, Speculation)
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Answer: B. II and III are correct
Read the notes: Foreign Exchange Market and Exchange Rate Determination →
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