4.1 - Exchange Rate Systems Flashcards
1
Q
What is the exchange rate?
A
External value of a currency in terms of other currencies
2
Q
What are the 3 types of exchange rate?
A
Floating
Fixed
Managed
3
Q
What is a floating exchange rate?
A
Rate determined entirely by supply + demand
No central bank intervention
4
Q
What is a fixed exchange rate?
A
Flat rate set + maintained by govt
Currency pegged to that of another nation
5
Q
What is a managed exchange rate?
A
Elements of fixed + floating
Central bank intervenes in foreign exchange to influence rate
6
Q
What is a depreciation/appreciation in the exchange rate?
A
Fall/Rise in floating ER system
7
Q
What is a devaluation/revaluation in the exchange rate?
A
Fall/Rise in fixed ER system
