how does foreign exchanges work why do exchange rates fluctuate?
In: Economics
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Lets imagine my family runs a business that produce, market and sell product X:
It would be a successful business as long as demand for our product is higher or equal to supply so we work very hard to maintain this status, and we do so by controlling many factors:
-1 creating safe and stable situation in the neighborhood. (Increase demand)
2- give good terms in case people want to buy and pay later, but not sooo much and so fast that we run out of cash flow (because we have suppliers and debits to pay) (increase demand)
3- having good reputation, we want to be known to have healthy situation economically, so we don’t take many risky moves specially in purchasing more than what we afford or suddenly changing things. (Increase demand)
4- control supply: for example we should produce just enough to how many buyers promised to buy, if we have excess then our product will be too available and too undervalued while it shouldn’t because we really offer great terms.. (control supply)
And any idea you can think of which can attribute to our goal!
Our family business = central bank
Product = national currency
Buyers = other countries, businesses and others
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