ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Federal Reserve Board
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Congress
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The Market-Supply and Demand
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Council of Economics Advisers
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Detailed explanation-1: -Exchange rates are determined just like other prices: by the interaction of supply and demand. At the equilibrium exchange rate, the supply and demand for a currency are equal. Shifts in the supply or demand for a currency lead to changes in the exchange rate.
Detailed explanation-2: -Supply of a currency is an outflow of money into an economy. The supply of a currency is determined by level of domestic demand for / expenditure on imported goods and services from abroad. It is also influenced by speculative outflows of a country’s currencies on the foreign exchange markets.
Detailed explanation-3: -Summary. Currency value is determined by aggregate supply and demand. Supply and demand are influenced by a number of factors, including interest rates, inflation, capital flow, and money supply. The most common method to value currency is through exchange rates.