ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
promote the argument supporting free trade.
|
|
|
promote the use of subsidies on foreign goods.
|
|
|
determine the price of one country’s imports in terms of another country’s imports.
|
|
|
determine the price of one country’s currency in terms of another country’s currency
|
Detailed explanation-1: -An exchange rate measures the price of one currency in terms of another. In turn, the terms of trade measure how many units of the foreign goods can one unit of the domestic good acquire.
Detailed explanation-2: -The most common way is to measure a bilateral exchange rate. A bilateral exchange rate refers to the value of one currency relative to another. Bilateral exchange rates are typically quoted against the US dollar (USD), as it is the most traded currency globally.
Detailed explanation-3: -Use exchange rates to determine how much foreign currency you want, and how much of your local currency you’ll need to buy it. If heading to Europe you’ll need euros (EUR), and will need to check the EUR/USD exchange rate at your bank. The market rate may be 1.113, but an exchange might charge you 1.146 or more.