Exchange rates

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Exchange rates

  • Exchange Rates: The value of one currency expressed in terms of another.

What are the influences on exchange rate:

  • Interest rates
  • Inflation
  • Economic growth
  • Public debt
  • Speculation
  • Shocks
  • Balance of payments

How can the government effect interest rates?

  • Keep debt down
  • Alter interest rates, the higher the interest rates, the stronger the currency
  • Encourage exports

Real Exchange rate:

  • The exchange rate against another currency adjusted for…

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