The rate at which one currency is exchanged for another currency.

(i) The balance between the values of goods and services exchanged between two countries.
(ii) It is a trade in both visible and non visible items.

The rate at which goods of one country are exchanged for that of another country i.e. ratio of export price and import price.

FDI has the following objectives.
(i) Sales Expansion
(ii) Acquisition of resources
(iii) Diversification
(iv) Minimization of competitive risk

Also known as floating exchange rate, the exchange rates are freely determined in an open market by market forces of demand and supply.

(i) It is a trade restriction that sets a limit on the quantity of a good that can be imported into a country in a given period of time.
(ii) Quotas are used to benefit the producers of good in that economy.

1. FDI is an important factor in global 
2. Foreign trade and FDI are closely related.
3. In developing countries like India FDI in tie natural resource sector like plantations, increases rade.
4. Foreign production by FDI is useful to substitute foreign trade.
5. FDI is also influenced by the income generated from the trade and regional integration schemes.
6. FDI accelerates the economic growth by facilitating essential imports needed for development programs like capital goods, technical know-how, raw materials, other inputs and even scarce consumer goods.
7. When the export earnings of a country are not sufficient to finance for imports, FDI may be required to fill the trade gap.
8. FDI is encouraged by foreign exchange shortage, desire to create employment and acceleration of the pace of economic development.
9. Many developing countries strongly prefer foreign investment to imports.

(i) The equilibrium rate of exchange is determined in the foreign exchange market according to the general theory of value, by the interaction of demand and supply,
(ii) Y axis represents exchange rate, be cos value of rupee in terms of dollars
(iii) X axis represents demand and supply of forex.
(iv) E is the equilibrium point where DD intersects SS. The exchange rate is P₂.