Differential Exchange Rates:

Question

Quizplus · Accepted Answer

Two types of differential exchange rates can be used. The first, which is government imposed, refers to a strategy the government uses to promote imports of desirable and necessary goods and to discourage imports of less desirable and necessary goods. A second type of differential exchange rate is favorable to the international firm importing products into this market. In this situation, a difference exists between the black market exchange rate and the official government exchange rate, with the black market rate being higher than the government rate.