week 11 Flashcards

1
Q

nominal exchange rate

A
  • rate at which one currency is exchanged by another

- where e expresses amount of foreign currency one AUD can buy

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2
Q

how is exchange rate determined?

A
  • supply and demand for currency
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3
Q

purchasing power parity

A
  • does not work well as
  • > some goods are not traded internationally
    e. g. hairdressing, agricultural land, highly preishable food items
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