Exchange rates Flashcards
1
Q
exchange rate
A
the price of a nations currency in terms of another
2
Q
floating exchange rate
A
currency value set by market forces (supply and demand). no intervention by central bank. no target for the exchange rate
3
Q
currency value affected by
A
Net trade
Interest rates
Price level
Speculation
Events (geopolitical)
Y income (mpm)
4
Q
fixed exchange rates
A
government/central bank fixes currency value. pegged exchange rate becomes official rate. revaluation = peg moved up. devaluation = peg moved down
5
Q
managed exchange rates
A
usually set by market forces, but central bank may intervene occasionally (by buying/selling reserves)
6
Q
monetary union
A
a group of countries that use the same currency
