ECONOMICS
FOREIGN CURRENCY MARKETS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
the price of one currency relative to gold.
|
|
|
the value of a currency relative to inflation.
|
|
|
the change in the value of money over time.
|
|
|
the price of one currency relative to another.
|
Detailed explanation-1: -An exchange rate is a relative price of one currency expressed in terms of another currency (or group of currencies). For economies like Australia that actively engage in international trade, the exchange rate is an important economic variable.
Detailed explanation-2: -The correct answer is option D) the price of one currency relative to another. The exchange rate denotes the price of one currency against another in the foreign exchange market.
Detailed explanation-3: -How much demand there is in relation to the supply of a currency will determine that currency’s value in relation to another currency. For example, if the demand for U.S. dollars by Europeans increases, the supply-demand relationship will cause an increase in the price of the U.S. dollar in relation to the euro.