Exchange rate policy

Question 1

Exchange Rate

Answer 1

It is the price of a foreign money in relation to the local money.

Question 2

Determinants of Exchange Rates:

Answer 2

1. Relative Income Changes - up income by filipinos = up demand for imports
2. Relative Price Changes - up prices of good locally = fllipinos to buy goods from other countries with lower prices
3. Relative Interest Rate - yields/interest on investment high in ph = foreign investor

Question 3

Exchange Rates Policies

Answer 3

**1. Pegged Exchange Rates **- price of f currency is pegg by CB.
2. Free Floating or Flexible Exchange Rates - determine by supply and demand
3. Managed Floating Exchange Rates - demand and supply but of foreign currencies to manage over/under supply of Forgn curecnes