ipl-logo

Essay On Exchange Rate

1130 Words5 Pages

Exchange Rate

Exchange rate is the price of a domestic currency in relation to foreign currency. It tells us the amount of rupee that is needed to buy, say, a US Dollar. When the value of Rupee appreciates in relation to the Dollar, the exchange rate is said to have fallen. Similarly, when the value of Rupee depreciates against the Dollar, the rate is said to have risen.

Nominal and Real exchange rate
Nominal exchange rate is simply the price of domestic currency in relation to another currency. However, there is no one single foreign currency. There are as many foreign currencies as there are foreign countries. A more meaningful way to define exchange rate therefore is not in terms of domestic currency in relation to another currency, but …show more content…

Real exchange rate captures the competitiveness of a country’s trade by additionally considering the relative price changes between the countries. It measures the net effect of the exchange rate and price pressures. Real exchange rate can be defined as follows:
Real = Nominal x Pt/Ph
Here, Pt is the price in the foreign country and Ph is the price in the home country. Other things being equal, if Pt increases at a faster rate than Ph, Pt/Ph will rise and the value of the real exchange rate will go up. Then, the rupee in real terms has depreciated though there is no change in the nominal exchange rate. Clearly, this is because of relative price changes that made Indian products more competitive. The opposite will happen if Ph rises faster than Pt.
It will be unrealistic to calculate the real exchange rate to just another currency. It has to be calculated against a basket of currencies to be meaningful.Real effective exchange rate captures this. The principle involved in estimating REER is the same as that for NEER. REER is arrived as the weighted average of the real exchange rate of the rupee in relation to all the other currencies where the weights reflect the importance of each currency in India’s foreign

Show More
Related

  • Nt1310 Unit 1 Data Analysis Essay

    395 Words  | 2 Pages

    SOF – The single dominant start of frame bit marks the start of a message, and is used to synchronize the nodes on a bus after being idle. Identifier-The Standard CAN 11-bit identifier establishes the priority of the message. Lower the value of identifier, its priority will be higher. RTR – The single remote transmission request (RTR) bit is used by the sender to inform receivers of the frame type.

    Read More

  • Adam Boyton's Argument Against The Australian Dollar

    122 Words  | 1 Pages

    The australian dollar has tipped dramatically only just 60 cents which is its lowest value against the paper currency. Deutsche Bank australian chief economist Adam Boyton says that more potential sellers demand more resources and there has been a really slow growth in china. The aussie dollar has already tumbled 20 persent in the past year we are now just above 70 us cents. Mr Boyton has said that Deutsche’s bank have predicted that the ausie dollar will hit 65 us cents.

    Read More

  • Ap Euro Chapter 1 Essay

    1521 Words  | 7 Pages

    (MIP-1) After the fall of rome there were issues (SIP-A) Poverty was common throughout europe (STEWE-1) A lot of the people were poor- without the good roads the trade fell apart so people survived by farming for themselves and if the weather was bad then they would starve without the food (Richardson). (STEWE-2) People suffered from diseases- they heavily relied on herbal medicine and lots of hope to survive (Richardson). (SIP-B) Without military there was nobody to protect the land (STEWE-1)

    Read More

  • Ap World Trade Dbq Essay

    790 Words  | 4 Pages

    For any country that wants to survive in the toughest of times, they need to have good trading capabilities. Very few countries are able to sustain themselves without indulging in intensive trade with other countries. Trading has been considered a good thing in the past, but with the changing world, there are doubts about the benefits of trading. There are some factors that lead to the development of trade networks between countries. When people started to settle in larger towns, the idea that you had to produce absolutely everything for survival, began to fade.

    Read More

  • Ap Euro Chapter 1 Essay

    856 Words  | 4 Pages

    1.) Mali: The empire of Mali was known for its variety of imported goods. The rich Muslim merchants imported items such as copper, brass, spices, Arabian horses, manufactured goods, slaves, and gold. Slaves and gold were the two major exports of the Mali empire. The high demand for gold caused foreigners to travel to Africa in search of the elite metal.

    Read More

  • Economic And Cultural World Dbq Essay

    636 Words  | 3 Pages

    The most two worlds that were most affected by being a site of encounter in Quanzhou were the Economic and culture world. The culture world lead to more trade which greatly affected China and the Economic world lead to more education around China. The Culture world was one of the two worlds that was affected by the site of encounter in Quanzhou. “Wang Yuan Mao was a Quanzhou man.

    Read More

  • Ap Euro Chapter 1 Essay

    398 Words  | 2 Pages

    1. Christopher Columbus- was a Spanish conquistador who went in front of the Spanish court to propose a plan to find a new ocean route for trade with the West Indies and Asia. Queen Isabella commissioned/funded his voyage to find a new trade route to Asia. He set out on this conquest with 3 ships - the Nina, the Pinta, and the Santa Maria. He crossed the Atlantic and made landfall on an island he named San Salvador which was part of the Americas.

    Read More

  • Global Trade Dbq Essay

    841 Words  | 4 Pages

    Benjamin Franklin said, “No nation was ever ruined by trade.” During the early modern era, technological advancements in shipbuilding and increased knowledge on wind and current patterns made global trading possible. The increased flow of trade in the 1300s through 1800s created important social relations and economic opportunities due to the increased integration of foreign people and desire to be wealthiest and most powerful, while improving government, culture, and ideas in the modern world. Global trading increased the spread of people, which also increased the spread of religion and culture.

    Read More

  • The Solution Essay: The Ever Changing Penny

    558 Words  | 3 Pages

    I emptied my pockets. Sure enough, they were full of useless junk. Upon closer inspection, in the depths of my front pocket, I found a single copper coin. Just enough to purchase one small piece of candy. My craving could finally be satisfied.

    Read More

  • Essay About Penny

    303 Words  | 2 Pages

    How significant is the penny for you? In the 1970’s, two pennies would buy a newspaper from the street vendor. These days, people don’t even bother picking up pennies off the street. Should the penny be retired? The penny was the first currency of any type authorized by the United States, and for over two centuries, the penny's design has symbolized the spirit of the nation.

    Read More

  • Free Trade In Canada Essay

    1167 Words  | 5 Pages

    The history of Canadian public administration over the years also plays a crucial role in the system. The Canadian public administration system was initially based on the British government system but has since then transformed into a system that is unique to the country (Drysdale, p.37). That interplay evolution made an independent system for Canada, and is a “result of Canada’s political culture, and the need for public administration to adapt over time, while upholding the principles of democracy” (Drysdale, 37). Therefore, the very reason the new Canadian public administration system came to be is because of the interplay of democracy and political culture, which is arguably the greatest influence it has had. The current system in place

    Read More

  • Synthesis Essay: The Importance Of The Penny

    412 Words  | 2 Pages

    The penny, serving as the United States' lowest denomination, should not be abolished. Pennies are often ignored, or regarded as inconsequential in the grand scheme of life. However, considering the ties between the public's perception of currency and their confidence in the American economic system, it is clear that the penny is indispensable. It is both a vital part of economic transactions and a reminder of American history. The penny represents the metaphorical golden age of the United States.

    Read More

  • Nickel And Dimed Analysis Essay

    1342 Words  | 6 Pages

    Nickel and Dimed Analysis: Minorities vs Majority vs Socioeconomics In Ehrenreich’s classic “Nickel and Dimed: On (not) getting by in America,” the protagonist opens up the dialogue with admitting that she picked out her job out of laziness (Ehrenreich, 1). With the setting in Key West, Florida, the main character being Ehrenreich herself, decides to experiment with the possibilities of existing as a person on the lower terminal of the socioeconomic ladder. For her experiment, she lives in the lower rung of the ladder, becoming a waitress (Ehrenreich, 10). Based in 1996, the novel is investigating the benefits and effects of the 1996 welfare reform bill, which was considered a jugular stab to the spirit of social reform and government assistance to the hapless.

    Read More

  • Essay On College Tuition Rates

    1704 Words  | 7 Pages

    The rise of college tuition rates is one of the major concerns the government is facing at this very moment. Within the millions of people attending college all over the world, America ranks number one when it comes to the highest tuition rates. Students across the United States have rallied and protested before the school boards to lower these outrageous tuition prices, but none thus far have yet to succeed. Tuition costs are higher than they have ever been throughout history and will continue to rise until a solution is achieved. Colleges today require a certain number of general education (G.E) courses, which must be completed during students first 2 years.

    Read More

  • Macroeconomic Factors Affecting Apple Company

    2241 Words  | 9 Pages

    For example, the sales of Apple products in US will decrease if there is a rise in the US. Because of this the purchasing power will also decrease. Hence the sales will be reduced. Hence, to reduce the rise effect, Apple has purchased itself foreign currency.

    Read More

More about Essay On Exchange Rate

Open Document