Exchange Rates
Definition
Exchange rates refer to the value of one currency in terms of another currency. It determines how much of one currency you can get in exchange for another.
Analogy
Think of exchange rates like a conversion rate when you travel abroad. Just like you need to know how many US dollars you'll get for 1 Euro, exchange rates tell you how much of one currency you'll get for another.
Related terms
Foreign Exchange Market: The market where currencies are bought and sold.
Floating Exchange Rate: An exchange rate that is determined by supply and demand in the foreign exchange market.
Fixed Exchange Rate: An exchange rate that is set by the government and does not change freely with market forces.
"Exchange Rates" appears in:
Study guides (1)
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Practice Questions (6)
According to the gold standard, how were exchange rates determined?
How does relative income affect exchange rates?
What effect does inflation have on exchange rates?
What is the reciprocal relationship between exchange rates?
What is the impact of speculation on exchange rates?
What is the connection between monetary policy and exchange rates?
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