Exchange Rates (xRr)

Question 1

exchange rates

Answer 1

• amount of domestic currency needed to buy 1 unit of foreign currency

Question 2

depreciation

Answer 2

• fall in value of a currency

Question 3

flexible (floating) exchange rates (xRs)

Answer 3

• determined by market forces

- central banks do not use OIR to influence market

Question 4

Fixed (pegged) exchange rates (xRs)

Answer 4

• central banks act to maintain equilibrium at find XR

Question 5

gold standard (1879-1934)

Answer 5

• currencies determined in terms of a quantity of gold

Question 6

international monetary fund (IMF)

Answer 6

• formed in 1944 to make loans to nations with temporary BoP deficits and, until 1971, administer the Bretton Woods System

Question 7

modified flexible system

Answer 7

• essentially a fixed XR system with countries occasionally manipulating currency values by buying/selling OIR