explain the difference between fixed and floating exchange rates 10. Why does total revenue vary directly with price, if the demand is relatively price inelastic? Explain the relationships betwee...

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explain the difference between fixed and floating exchange rates

10. Why does total revenue vary directly with price, if the demand is relatively price inelastic? Explain the relationships b

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Answer 1

Answer #1

1. In the fixed exchange rate system, the central bank of a country ties the exchange rate of the currency with another currency to keep its value fixed with respect to the other currency.

In a floating exchange rate system, the exchange rate of a currency is determined by the market forces of demand and supply.

10.

The revenue depends on price and price elasticity.

In the case of relatively elastic demand, the % change in quantity demanded is higher than the % change in price. Therefore, increasing the price would lower revenue and decreasing the price would increase revenue.

In the case of relatively inelastic demand, the % change in quantity demanded is lower than the % change in price. Therefore, increasing the price would increase revenue and decreasing the price would decrease revenue.

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Answer 2

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explain the difference between fixed and floating exchange rates 10. Why does total revenue vary directly with price, if the demand is relatively price inelastic? Explain the relationships betwee...

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explain the difference between fixed and floating exchange rates 10. Why does total revenue vary directly with price, if the demand is relatively price inelastic? Explain the relationships betwee...

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