3) Calculating Exchange Rates - MMT Flashcards

1
Q

what is a currency?

A

a tangible form of money (e.g. notes and coins) used by a particular country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what is the UK’s currency?

A

the £ sterling

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what is the exchange rate?

A

price of one currency in terms of another

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what are the 2 basic ways of managing x-rates?

A

i) floating - price of currencies is determined by demand and supply for the currency on the FOREX

ii) fixed - where the central bank of the country pegs its currency at a certain rate against another currency and tries to ensure that the fixed rate is maintained over time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

why will businesses require foreign currency ?

A

to pay for imports from abroad

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is an example of a business requiring foreign currency?

A
  • if a UK business is importing wine or fruit from Italy the Italian businesses are likely to want payment in their currency, the Euro
  • similarly, if morgan are exporting cars to Spain, they will prefer payment in £sterling
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is an example of households demanding foreign currencies?

A

to use on their holidays abroad

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

is a British tourist holidaying in Italy an export or import?

A

it’s an import for the UK, similar to a British supermarket importing wine from Italy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

when converting currency you need to distinguish between the… currency and the … currency

A
  • base
  • foreign
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what does DIME stand for?

A
  • Divide for imports
  • Multiply for exports
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what does SPICED stand for?

A

Strong Pound, Imports Cheap, Exports Dear

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What does WPIDEC stand for?

A

Weak Pound Imports Dear Exports Cheap

How well did you know this?
1
Not at all
2
3
4
5
Perfectly