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Economics > Module 18.1: Foreign Exchange Rates > Flashcards

Module 18.1: Foreign Exchange Rates Flashcards

1
Q

Define an exchange rate?

A

Simply the price or cost of units of one currency in terms of another.

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2
Q

What is the difference between the nominal exchange rate and the real exchange rate?

A

nominal exchange rate - the exchange rate at a point in time

real exchange rate - dollar cost of purchasing that same unit of goods and services based on the new (current) dollar / euro exchange rate.

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3
Q

What is the formula for the real exchange rate?

A

nominal exchange rate * ( CPI base currency / CPI price currency)

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4
Q

What is a forward exchange rate?

A

currency exchange rate for an exchange to be done in the future.

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5
Q

Who participates in “speculative” tranactions regarding currency?

A

investors, companies, financial institutions

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6
Q

What is the formula for cross rate using MXN, AUD, and USD?

A

USD / AUD * MXN / USD

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Economics (19 decks)

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