10.4 Exchange rate systems

Question 1

What are exchange rates?

Answer 1

The price of one currency expressed in terms of another currency

Question 2

What is a free floating exchange rate?

Answer 2

A floating exchange rate is an exchange rate that is set purely by the forces of demand and supply, and free from government intervention

Question 3

What is a fixed exchange rate?

Answer 3

This occurs when a government tries to maintain its exchange rate against that of another currency

Question 4

What is a currency union?

Answer 4

A currency union is a group of independent countries that share a single currency, also known as a monetary union