Question

Select the correct answer. which statement describes the currency exchange rate?

a. the rate at which the value of a currency changes over time
b. the rate at which people exchange currency for foreign goods and services
c. the rate at which one currency is converted to another currency
d. the rate at which currency is spent in a foreign country

Answer 1

The currency exchange rate is the rate at which one currency is converted to another, influenced by supply and demand in the foreign exchange markets.

Step-by-step explanation:

The correct statement that describes the currency exchange rate is: the rate at which one currency is converted to another currency. This is because the exchange rate represents the price of one currency in terms of another, which fluctuates based on the supply and demand in foreign exchange markets. The factors that cause shifts in exchange rates can be analyzed using supply and demand graphs.

Central banks may influence these rates by deciding either to let the market determine the exchange rates or to intervene. An understanding of exchange rates is essential in fields like international business, economics, and finance, as they affect trade, foreign investments, and the comparison of economic indicators across countries, such as GDP measured in different currencies.