Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Open Economy Macro Economics

Question:
Which of the following determines "Equilibrium exchange rate" in the foreign exchange market in India?
Options:
International Monetary Fund
Reserve Bank of India
World Bank
Demand and supply
Correct Answer:
Demand and supply
Explanation:
Just like equilibrium for commodity market, equilibrium exchange rate in the foreign exchange market in India is determined by the forces demand and supply. India has a managed floating exchange system where market demand and supply determine exchange rate and there is intervention by RBI sometimes to manage the exchange rate.