Chapter 16- exchange rates

Question 1

floating exchange rate

Answer 1

is determined by market forces. It reflects the demand for the currency, to buy its products or invest there, and the supply of currency, which arises from buying imports and capital flows abroad.

Question 2

Appreciation

Answer 2

refers to rising value. when the exchange rate appreciates, we get more for our pound.

Question 3

depreciation

Answer 3

means falling values. Exchange rate depreciation means that a unit of currency buys less. There will be a gain in competitiveness as export prices fall.

Question 4

Boom

Answer 4

a time of rapid economic growth, rising demand, lower unemployment, rising inflation

Question 5

stagflation

Answer 5

is an unattractive combination of stagnant GDP with prices rising at uncomfortable rates

Question 6

leading indicators

Answer 6

early signs of the direction of economic activity

Question 7

lagging indicators

Answer 7

are measures which are slow to reflect the current state of the economic activity