Exchange rates
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5 Terms
What is an exchange rate?
The rate at which one currency may be converted into another.
What is exchange rate depreciation?
The value of a currency falls, it’s exchanged for less in a foreign country.
What is exchange rate appreciation?
When value of a currency rises, meaning it can be exchanged for more foreign currency.
Makes it cheaper to borrow from other countries.
What is the effect of exchange rate appreciation on consumers?
Cheaper imports.
Consumers can buy more foreign goods.
Increases disposable income.
What is the effect of depreciation on consumers?
Price of imports increase, increasing inflationary pressure.
May deter investment as they do not expect return on investment.
Note 
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