Role of Exchange Rates

Question 1

Define “currency exchange rate.”

Answer 1

The price of one unit of a country’s currency expressed in units of another country’s currency; the rate at which two currencies will be exchanged.

Question 2

Define “indirect (currency) exchange rate.”

Answer 2

Currency exchange rate expressed as the foreign currency price of one unit of the domestic currency (e.g., euro cost of one U.S. dollar).

Question 3

Define “direct (currency) exchange rage.”

Answer 3

Currency exchange rate expressed as the domestic price of one unit of a foreign currency (e.g., U.S. dollar cost of one euro).