4.2 Exchange Rates Flashcards by Charlie Maunder | Brainscape

Q

What is a nominal exchange rate

A

This is the weight of one currency relative to another, without being adjusted for inflation

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is a real exchange rate

A

This is when the exchange rate is adjusted for inflation to give a more accurate reflection of purchasing power

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is a trade-weighted exchange rate

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What determines a floating exchange rate

A

The value of the exchange rate in a floating system is determined by the force of supply and demand

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

Explain this floating exchange rate diagram

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What determines a fixed exchange rate

A

A fixed exchange rate had a value determined by the government compared to other currencies

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

Explain this fixed exchange rate diagram

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by a bilateral measure of exchange rates

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by an effective measure of exchange rates

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by a nominal measure of exchange rates

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by a real measure of exchange rates

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by a depreciation

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by an appreciation

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by a devaluation

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

What is meant by a revaluation

A

How well did you know this?

1

Not at all

2

3

4

5

Perfectly

Q

How does inflation impact the exchange rates

A

Q

How do interest rates impact the exchange rates

A

Q

How does speculation impact the exchange rates

A

Q

How do other currencies impact the exchange rates

A

Q

How does government finance impact the exchange rates

A

Q

How does the balance of payments impact the exchange rates

A

Q

How does international competitiveness impact the exchange rates

A

Q

How does government intervention impact the exchange rates

A

Q

What are the effects of exchange rates on AD

A

Q

What is a hybrid exchange rate system

A

Q

Advantages of a fixed exchange rate system

A

Q

Advantages of a floating exchange rate system

A

Q

Advantages of a hybrid exchange rate system

A

Can make fluctuations in currency more predictable, so business investment is not hindered significantly with economic shocks

Can bring the benefits of both fixed and floating exchange rate systems together

Q

Disadvantages of a fixed exchange rate system

A

Q

Disadvantages of a floating exchange rate system

A

Q

Disadvantages of a hybrid exchange rate system

A

Protection against fluctuations is only temporary and it could make monetary policy inflexible

Q

What is the effectiveness of changing the value of a currency to achieve macroeconomic policy objectives

A

Q

What is the purchasing power parity (PPP) theory

A