Exchange Rates.

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Presentation transcript:

Exchange Rates

Foreign Exchange When foreign currencies are bought and sold in the foreign exchange market This happens when trades occur or when money is exchanged

Foreign Exchange Rate How much a country’s currency is worth compared to another country’s currency

When the rate is fixed and does not change. Fixed Exchange Rate When the rate is fixed and does not change. Even if exchange rates overall change, this rate will not.

These were used when the money system was backed with gold. No longer used anymore.

Flexible Exchange Rate When supply and demand change the exchange rate. Used now that we no longer have gold backing our money.

Trade Deficit When the value of the products imported are more than the value of the products exported. AKA: Importing more than exporting.

Trade Surplus When the value of the products exported are more than the value of the products imported. AKA: Exporting more than importing.

Balance of Payments The difference in money paid or received from trade. Sometimes more is paid than is received or vice versa.

You want there to be an even trade. Most of the time more is paid than is received.