Exchange rates Flashcards
1
Q
What is:
Exchange rate
A
price of one currency in terms of another
2
Q
What is:
Foreign exchange market
A
A market where foreign currencies can be brought and sold
3
Q
What are:
Interest rates
A
Return on savings or cost of borrowing money
4
Q
What is:
Speculation
A
Buying and selling of currencies in the hope of making a capital gain (profit)
5
Q
What are:
Commodities
A
Natural resources that come from the earth
6
Q
What is:
Currency appreciation
A
- when a currency becomes stronger against another currency
- currency depriciation is the opposite
7
Q
What are the advantages of:
Devaluation
A
- Improves CA
- Increase in exports
8
Q
What is:
Re-evaluation
A
- An upward adjustment to a country’s excahnge rate to a baseline, such as gold or a currency
- Devaluation is the opposite
9
Q
What are the advantages of:
Revaluation
A
- Imports become cheaper
- Lowers levels of inflation
10
Q
What is:
Hot money
A
- When money is moved into another economy as there is a higher interest rate meaning that more money can be made by saving
- Leads to foreign currency flowing into the country
- Leads to the demand for the currency increase
- Value of the currency will increase
