exchange rates

[hanaacdr]

is the flexible exchange rate and the floating exchange rate the same?
and could you please explain this to me

thanks

[hanaacdr]

could i also get some help on the dot point from topic 2


• determination of exchange rates including fixed, flexible and managed rates

[isaacdelatorre]

is the flexible exchange rate and the floating exchange rate the same?
and could you please explain this to me

thanks

Hey there hanaacdr,

A flexible exchange rate and a floating exchange rate mean essentially the same thing - that the exchange rate is determined by the market forces of supply and demand - i.e. the demand for an economy's currency and the supply of it (imports, exports, capital etc.) For more information check out this website here

As for your second question, this dot point is asking you to know why an economy might choose one type of exchange rate over another e.g. fixed exchange rate over a flexible exchange rate. Therefore, you must know the definition and characteristics of each (e.g. floating exchange rate is with no government intervention whereby the value of currency is determined by the market forces of supply and demand).

You should also know the advantages and disadvantages of each type of exchange rate as this forms the basis of why you would choose one over the other - e.g. floating exchange rate depicts an accurate representation of the currency's value but is vulnerable to volatility.

It would also be handy to know an example for each (you could even use Australia's progression from a fixed exchange rate to a managed flexible peg to a floating exchange rate.

I know it seems like a lot, but this is the basis of what you need to know for this dot point. Let me know if anything needs clarifying

[hanaacdr]

Hey there hanaacdr,

A flexible exchange rate and a floating exchange rate mean essentially the same thing - that the exchange rate is determined by the market forces of supply and demand - i.e. the demand for an economy's currency and the supply of it (imports, exports, capital etc.) For more information check out this website here

As for your second question, this dot point is asking you to know why an economy might choose one type of exchange rate over another e.g. fixed exchange rate over a flexible exchange rate. Therefore, you must know the definition and characteristics of each (e.g. floating exchange rate is with no government intervention whereby the value of currency is determined by the market forces of supply and demand).

You should also know the advantages and disadvantages of each type of exchange rate as this forms the basis of why you would choose one over the other - e.g. floating exchange rate depicts an accurate representation of the currency's value but is vulnerable to volatility.

It would also be handy to know an example for each (you could even use Australia's progression from a fixed exchange rate to a managed flexible peg to a floating exchange rate.

I know it seems like a lot, but this is the basis of what you need to know for this dot point. Let me know if anything needs clarifying

thank you so much!
it really helps!

[K9810]

What are inflation differentials?
What is the difference between cross rate/bilateral exchange rates and term weighted index exchange rates? 

[dradford]

Hey, I'm pretty sure Bilateral exchange rate is when the dollar is determined against a single currency e.g US. However, this can make misleading impressions as there are many factors affecting both the value of the Australian dollar and the US dollar so to look at just their exchange rate, misleading assumptions about the rate of appreciation/depreciation could be made. On the other hand, the TWI - Trade Weighted Index measure of the value of the Australian dollar against a basket of foreign currencies of major trading partners. The currencies are weighted according to their significance to Australia's trade flows.