Chapter 29: Exchange Rates and International Capital Flows Flashcards
(10 cards)
- What does it mean when a country “dollarizes”?
It uses the U.S. dollar as its official currency.
- Which of the following countries has dollarized?
El Salvador
What is a “common currency”?
A single currency shared by multiple nations
What major currency was adopted by 17 European nations in 1999?
Euro
What is the foreign exchange market?
A market where currencies are exchanged between nations
- According to the passage, what is the size of daily trading in the foreign exchange market as of 2019?
$5.3 trillion
What makes the foreign exchange market the largest market in the world economy?
The volume of currency traded daily is massive
If the exchange board says “U.S. DOLLARS: BUY 5.50; SELL 5.80,” how many Turkish Lira would you get for $100?
$550
Why are there two rates listed on the exchange board (buy and sell)?
Because the currency office makes a profit by buying low and selling high
Which currency is involved in the majority of foreign exchange transactions?
U.S. Dollar
