CH 41 Exchange rates

Question 1

What is exchange rate?

Answer 1

The price of one currency compared to another

Question 2

What are the factors affecting exchange rates?

Answer 2

-Intrest rates
-Currency speculations
-The demand for exports

Question 3

How do intrest rats affect exchange rates?

Answer 3

-If the domestic interest rates are better, more people will keep their money in that country
-Doing this, they have to buy the domestic currency
-Therefore, a better intrest rate increases the demand for the local currency

Question 4

What are the factors affecting the supply of currency?

Answer 4

-Intrest rates in other countries
-Currency speculations
-The demand for imports