Question

In international trade, an exchange rate is _________.

1) a way to record a nation's imports and exports
2) an agreement between nations to reduce trade barriers
3) a chart for keeping track of prices on a stock exchange
4) a number that is used to show the value of one currency compared to another

Answer 1

An exchange rate is a number used to compare the value of one currency to another, influenced by supply and demand in the market and affected by government policies.

Step-by-step explanation:

In international trade, an exchange rate is a number that is used to show the value of one currency compared to another. Essentially, exchange rates serve as the price of one currency expressed in terms of units of another currency. This valuation is driven by the forces of supply and demand in currency markets, similar to the operation of supply and demand for goods and services in the economy.

To elucidate, when we seek to compare GDP statistics between countries that measure economic output in different currencies, we employ exchange rates as a tool to convert these values to a common reference for comparison. Furthermore, exchange rates fluctuate based on various economic factors such as trade balances, market speculation, and central bank policies. Governments can influence these rates through mechanisms such as monetary policy, intervention, and trade strategies, impacting international competitiveness and economic growth.

Answer 2

An exchange rate is the value of one currency expressed in terms of another, determined by supply and demand in markets, and can be influenced by government policies.

Step-by-step explanation:

In international trade, an exchange rate is a number that is used to show the value of one currency compared to another. It is not a way to record a nation's imports and exports, an agreement between nations to reduce trade barriers, nor a chart for keeping track of prices on a stock exchange.

The exchange rate serves as a crucial price—the price of one currency expressed in terms of units of another currency. Key factors such as supply and demand in markets are instrumental in determining the exchange rates. Governments can manipulate exchange rates through various mechanisms, like adjusting interest rates and altering trade incentives, which ultimately influence the global trade dynamics.

An exchange rate is the price of one currency expressed in terms of units of another currency. It is a number that is used to show the value of one currency compared to another. In international trade, exchange rates play a crucial role in determining the cost of goods and services between countries.