Exchange Rates Flashcards
1
Q
What is an exchange rate?
A
The value of one currency expressed in the terms of another.
2
Q
Freely Floating Exchange rate system
A
In a floating exchange rate system, exchange rates are determined by market forces or the forces of demand and supply, with no government or central bank intervention in the foreign exchnge market
3
Q
What is appreciation?
A
An increase in the value of a currency in a floating exchange rate system.
4
Q
What is depreciation?
A
A fall in the value of a currency in a floating exchange rate system
5
Q
What is meant by “fixed exchange rate”
A
Exchange rates are fixed by the central bank of a country at a particular level and are not permmitted to change freely in response to changes in currency supply and demand.
