Chapter 26- Exchange Rates
- Exchange rate- the value of one’s country currency expressed in terms of another country’s currency
- Forex Market- aka International Foreign Exchange Market- where currency is being exchanged worldwide by gov’ts, central banks, large private banks, multi-national companies. This will impact the exchange rate of a particular country
Exchange Rate Systems
- Fixed Exchange Rate System- where a country’s currency is “pegged” to another country’s currency, a basket of currencies, or to a commodity (gold).
- as the other country’s currency, the group of currencies, or commodity value increases, so does the currency and vice versa
- revaluation- value of the currency goes up in fixed exchange rate system
- devaluation- value of the currency goes down in fixed exchange rate system
