Posts

Showing posts from August, 2020

FLEXIBLE EXCHANGE RATE

Image
FLEXIBLE EXCHANGE RATE Under the floating or flexible exchange rate, the exchange rate is allowed to vary to international foreign market market influences. Thus government does not intervene , rather in the market forces that determine the exchange rate. In fact, automatic variations in exchange rate consequent upon a change in the market forces are the essence of freely flexible exchange rate.  A deficit in the balance of payment account means an excess supply of the domestic currency in the world market. As price declines, imbalances are removed. In other words excess supply of domestic currency will automatically cause a fall in the exchange rate and balance of payments balance will be restored.  Flexible exchange rate mechanism has been explained in the figure where DD and SS are demand and supply curves. When Indian buy US goods there arises supply of dollar and when US people buy Indian goods there occurs demand for rupee. The initial exchange rate RS 40= $1...

FIXED EXCHANGE RATE

Image
FIXED EXCHANGE RATE A fixed exchange rate is a exchange rate that does not fluctuate or that changes within a pre determined rate at infrequent intervals. Government or the central monetary authority intervenes in the foreign exchange market so that exchange rates are kept fixed at a stable rate. The rate at which the currency is fixed is called per value. This per value is allowed to move in a narrow range or "band" of +_ per cent. If the sum of current account and capital account is negative , there occurs an excess supply of domestic currency in world markets. The government then intervenes using official foreign exchange reserves to purchase domestic currency.  The fixed exchange rate can be explained graphically. Let us suppose that India's demand for US goods rises. This increased demand for import causes an increase in the supply of domestic currency, rupee, in the exchange market to obtain US dollars. Let DD and SS be the demand and supply curves of ...

EXCHANGE CONTROL

EXCHANGE CONTROL Exchange control , governmental restrictions on private transactions in foreign exchange (foreign money or claims on foreign money). The chief functions of most system of exchange control is to prevent or redress an adverse balance of payment by limiting foreign exchange purchases to an amount not in excess of foreign exchange receipts. Residents are required to sell foreign exchange coming into their possession to the designated exchange control authority at rates set by the authority. Some system permit recipients of exchange from certain sources to sell a portion of such receipts in a free market because the  control authority thus become the only foreign exchange market. It can determine the purposes for which foreign exchange can be spent and to fix the amount that is available for each purpose. A controlled exchange rate is usually higher than the free market rate and has the effect of curbing exports and stimulating imports. By limiting the amount of for...

QUOTA Vs TARIFF

QUOTA VERSES TARIFF MEANING Tariff : Tariff refers to the tax levied on import or export of goods. Quota : Quota refers to the restrictions imposed on the quantity                  of goods imported. Effect on GDP Tariff : Increases GDP Quota : Decreases GDP INCOME Tariff : To Government Quota : To importer RESULTS IN Tariff : Fall in consumers surplus and rise in producers surplus Quota :  Fall in consumers surplus

Non Tariff Barriers to Trade

Image
INSTRUMENTS TO TRADE POLICY Non Tariff Barriers to Trade Tariff - not instrument to restrict trade - give protection to domestic import competing industries - numerous USA [United States Of America] - decided to ban import of carpets from India - child labour used in Indian carpet industry - consignments return - good pose health hazards to the citizens of country - excuses offered by the importing country to restrict or prohibits import - such restrictions is called  non tariff barriers. GOVERNMENT imposed non tariff barriers - to discriminate against imports or in favour of exports. KINDS OF NON TARIFF BARRIERS AND THEIR IMPLICATIONS:-

MEANING AND TYPES OF RESOLUTIONS

Image
 

QUORUM OF MEETING

Image