Final answer:
The term 'dollar' refers to currency when absolute prices are mentioned. Exchange rates represent the price of one currency in terms of another, and these rates fluctuate according to market dynamics.
Step-by-step explanation:
The statement that when absolute prices are measured in terms of dollars, the term 'dollar' refers to currency is true. In the context of economics and business, prices are indeed often expressed in terms of a currency such as dollars. The dollar serves as a unit of measure indicating how much of that currency is required to purchase a particular good or service. When discussing absolute prices, we refer to the total cost without considering the purchasing power or currency exchange rates. For example, if a product is priced at 15 dollars, it requires 15 units of U.S. currency to make the purchase.
When assessing price in an international context, exchange rates become crucial as they allow us to understand how much of one currency is needed to exchange for another currency. An exchange rate is essentially the price of one currency in terms of another. This price fluctuates based on many factors, such as supply and demand in financial markets, inflation rates, and the relative stability of economies.