Chapter 16- exchange rates Flashcards
floating exchange rate
is determined by market forces. It reflects the demand for the currency, to buy its products or invest there, and the supply of currency, which arises from buying imports and capital flows abroad.
Appreciation
refers to rising value. when the exchange rate appreciates, we get more for our pound.
depreciation
means falling values. Exchange rate depreciation means that a unit of currency buys less. There will be a gain in competitiveness as export prices fall.
Boom
a time of rapid economic growth, rising demand, lower unemployment, rising inflation
stagflation
is an unattractive combination of stagnant GDP with prices rising at uncomfortable rates
leading indicators
early signs of the direction of economic activity
lagging indicators
are measures which are slow to reflect the current state of the economic activity