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8 votes

Who determines the exchange rate and how?

Technically you are changing the BDT/USD exchange rate, or at least you're changing one of the reasons. If supply/demand changes, the value of a particular currency is going to change as well. But ...
caverac's user avatar
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5 votes
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Can't a country grow its GDP without foreign investment?

No, you can definitely grow GDP without foreign investment or even trade. There are 3 basic ways to grow GDP. One is increasing human capital, which includes increasing population as well as ...
theresawalrus's user avatar
4 votes
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How is the rest of the world making the US an interest free loan by holding US currency?

Think about what a loan is in terms of purchasing power. You give a bank your signature on a loan contract and they give you something that will allow you to buy real stuff (houses, cars, whatever). ...
farnsy's user avatar
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4 votes

Theoretical market capitalisation of a crypto currency?

As there is no practical limit on the number of cryptocurrencies that can be created, and as no one crpytocurrency has a unique advantage over any other, and as no cryptocurrencies are legal tender ...
410 gone's user avatar
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4 votes
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Why doesn't Russia buy USD to pay its external debt and avoid default?

Because Russia is effectively banned from using dollars. Also, Russia has enough dollars to finance its debt. The reason why Russia might default is that they are not allowed to use their USDs. For ...
1muflon1's user avatar
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3 votes

What negative effects would result from globally fixing currency exchange rates?

Is the only benefit to fluctuating currency rates that it means some people make a lot of money by trading currencies, with zero appreciable benefit to humanity at large ? No. The main benefit of ...
got trolled too much this week's user avatar
3 votes
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Is it true that the U.S has to run a chronic trade deficit with the rest of the world as a price to pay for being the world's reserve currency?

This is an excellent question and I will do my best to give you a well thought out answer. Many observers believe the U.S. dollar (USD) will lose its status as the world's reserve currency. In fact, ...
Daniel's user avatar
  • 476
3 votes

Russian ruble drop in value due to low oil prices

The Rouble depreciates against the US dollar because of demand and supply. Think of it as a story that goes as follows: a) In the ruble/dollar market, the supply of dollars consists of foreigners ...
Fix.B.'s user avatar
  • 2,668
3 votes

Why is oil being traded in U.S. dollars?

why would they force to trade in U.S. dollars instead of just taking the oil from their country by force? One of the basic tenets of power is that $control$ is superior to $ownership$. War is ...
heh's user avatar
  • 1,806
3 votes
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Is the forex market a form of bartering?

No by definition forex is not bartering. By definition (see here) bartering is Barter is an act of trading goods or services between two or more parties without the use of money (or a monetary medium ...
1muflon1's user avatar
  • 57k
3 votes
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Can an appreciating currency lead to inflation?

You are wrong/vague here: the rupee (INR), is appreciating against, say, the USD, it possibly means that there is a high demand for the former. If the rupee becomes more expensive w.r.t. the dollar, ...
Giskard's user avatar
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3 votes

How often (if ever) do currency exchange cross rates differ from actual rates?

Where? Retail, interbank, airport vendors... Generally prices are never identical. There is no no such thing as the FX price. There will always be a bid ask spread and every market maker or platform ...
AKdemy's user avatar
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2 votes
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Who determines the exchange rate and how?

In many ways, it's no different to how any other price is set - by supply and demand. The only thing is, that because it's a transaction of money for money, there's some symmetry at play. When you ...
410 gone's user avatar
  • 8,168
2 votes

How does Egypt prevent people from arbitraging their currency?

Used to be capital controls. You could only buy dollars (or any other foreign currency) through official channels at the official favorable rates by providing documentation displaying need for said ...
tvbc's user avatar
  • 114
2 votes
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Misleading vertical axis in foreign exchange graphs analyses?

The convention in finance is that any currency pair "currency1/currency2" is to be interpreted as the number of units of currency2 needed to buy one unit of currency1, or alternatively, as the number ...
luchonacho's user avatar
  • 8,591
2 votes

What physically happens when foreign currency reserves change?

Typically foreign reserves will just be assets denominated in a foreign currency, most importantly government debt. Another popular reserve asset are IMF special drawing rights, which are convertible ...
Tobias's user avatar
  • 970
2 votes

How is the rest of the world making the US an interest free loan by holding US currency?

U.S. federal financial liabilities consist of currency, reserves at the Fed, bonds, and bills. Bonds and bills do not pay interest, currency does not. For reserves at the Fed, excess reserves need to ...
Brian Romanchuk's user avatar
2 votes

Abolishing all tariffs without reciprocity

You get cheaper access to inputs. For a large advanced economy that is relatively diversified, it is possible that unilateral tariff reductions across many or all sectors can be good for the economy ...
nathanwww's user avatar
  • 626
2 votes
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Theoretical market capitalisation of a crypto currency?

Unfortunately, those who are riding the current trend do not have a clue about what they are doing. I guess, they don't even think of hypothetical situations you've given above to legitimise ...
london's user avatar
  • 2,010
2 votes

Why is oil being traded in U.S. dollars?

I'll try to answer your question as best as I understand it. There are innumerable reasons for why taking oil by force from these nations would be seen as unnecessary by the US, for both political ...
Emil's user avatar
  • 21
2 votes
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Do local taxes help in paying back foreign debts?

If you actually raise local tax it would help you can just convert the money raised with local tax into the currency in which the debt is. For example, if UK has some debt in Euros they can raise ...
1muflon1's user avatar
  • 57k
2 votes

Why does an increasing demand for dollars lead to the depreciation of a currency?

I am by no means an expert in monetary policy, but this is how I understand it. An increasing demand for dollars implies that more people want to trade the local currency for dollars. The supply of ...
Alba's user avatar
  • 56
2 votes

How does foreign trade work in a planned economy?

The trade in itself was not that much different per se but it was restricted and overseen by the government. For example, USSR was net oil exporter and most of its oil was sold for US dollars at ...
1muflon1's user avatar
  • 57k
2 votes
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Dynamics of interest rates, exchange rates and bond prices within the UIP

One possible flaw in your reasoning is your assumption about what happens to bond prices when there are capital inflows. For example , suppose that the Bank of England has fixed short term interest ...
dm63's user avatar
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2 votes
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How do Foreign Investments by Central Banks increase the Money Supply of an Economy?

In your question you assumed that if you spend SFr 100bn on US stocks, the sellers of those stocks are getting the SFr. But that’s not true. Those sticks trade in USD, so what actually happens is ...
dm63's user avatar
  • 1,313
2 votes
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How did empires make wealth out of empire-colony trade?

But why would an empire transport finished goods back to colonies? During the time the prevailing economic theory was mercantilism. According to mercantilism the way how country progresses and gets ...
1muflon1's user avatar
  • 57k
2 votes

Why people buy foreign bonds when foreign interest rate raises?

There are a lot of false assumptions here. A probably incomplete list: You (implicitly) assume is that the Investopedia article is telling the whole story (Investopedia is not particularly reliable) ...
AKdemy's user avatar
  • 4,122
1 vote

How does interest rate impact exchange rate?

Your first paragraph, except the last part of the sentence, is the statement of covered interest rate parity (CIP), which holds perfectly if not absolutely, except after the 2008 financial crisis (See ...
L. Francis Cong's user avatar
1 vote
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How is India able to increase its foreign exchange reserves despite historically running a trade deficit?

The central bank's accounts are not the same as entire country's accounts. The foreign currency reserves statistic comes from the Reserve Bank of India, the central bank, when it discloses its ...
H2ONaCl's user avatar
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