Exchange rate Flashcards
1
Q
Exchange rate
A
The value of currency in the price of another currency
2
Q
Floating exchange rate
A
Value of currency is determined by the free market
3
Q
Depreciation
A
A reduction in the value of a currency
4
Q
Appreciation
A
The increase in the value of a currency
5
Q
Causes of changes in the exchange rate
A
Interest rates
Inflation rate
Income
Foreign direct investment
Expectations of exchange rate movements
6
Q
Fixed exchange rate
A
The exchange rate is set by the government and central bank
7
Q
Methods to control exchange rate fluctuations
A
Use foreign currency reserves to alter supply
Borrow foreign currency from abroad
Alter interest rates
