Exchnage Rates

Question 1

Exchange rate

Answer 1

The Roxie of a currency in terms of another currency

Question 2

Exchange rate mechanisms

Answer 2

1. Imports -
2. Exports - takes place on foreign exchange market
3. Invests- buys shares in overseas companies

Question 3

Appreciation on economy

Answer 3

Increase in demand for a currency. Increase of one currency against others is appreciation

Question 4

Depreciation

Answer 4

Global market supply of a currency rises selling their national currency to buy foreign currencies , the exchange rate of that currency will fall

Question 5

Deprecation on economy

Answer 5

1. Inflation - cost push
2. Cheaper exports
3. Improvement in current account
4. Wages devaluation - makes Malta less attractive for foreign workers

Question 6

Appreciation on economy

Answer 6

1. Lower inflation
2. Cheaper imports
3. Exports are more expensive
   4 lower (x-m) fall in AD causing lower economic growth