Factors affecting Exchange rates
What is the value of one currency in terms of another?
True or False
If Zimbabwe cuts 12 zeros from their currency, the number value is much greater, so the currency is stronger
False
What Happens to a Country’s Trade Deficit During an Economic Boom?
During an economic boom, a country’s trade deficit usually grows because spending and investment inflows rise, strengthening the currency and increasing imports.
There are two main factors affecting exchange rates
What is financial flows and international trade?
Name three economic factors exchange rates can influence.
Inflation, trade, and foreign investments
Countries that rely heavily on exports often prefer this type of exchange rate system because it provides stability and keeps their goods competitively priced abroad.
What is a fixed or managed exchange rate system?
The U.S dollar appreciates. What will the trade impacts be?
Imports will become cheaper and exports will become more expensive.
A country that wants to cushion its economy from external shocks, like falling oil prices, is most likely to adopt this type of exchange rate policy.
What is a floating exchange rate policy?
The US is in a trade_____ with Jamaica
What is a trade surplus?