Topic 3 Flashcards
1
Q
What are the factors affecting exchange rates?
A
Inflation rate, interest rate, GNP growth rate and political and economic risk.
2
Q
How does inflation affect the exchange rate?
A
Inflation increase, the price of goods increases, the demand of dollars decreases, and the value of the dollar decreases.
3
Q
How does the interest rate affect the exchange rate?
A
interest rates increase, the demand for the dollar increases, and the value of the dollar increases.
