Economic Factors and Exchange Rates Summary

These flashcards cover key economic concepts related to GDP, the business cycle, and exchange rates, aiding in understanding external economic factors.

What does GDP stand for and what does it measure?

GDP stands for Gross Domestic Product and measures the total value of a country's output in a year.

What is real GDP?

Real GDP takes inflation into account when measuring economic activity.

What does the business cycle illustrate?

The business cycle shows fluctuations in economic activity over time.

How is the exchange rate defined?

The exchange rate is the price of one currency expressed in terms of another currency.

What factors determine free exchange rates?

Free exchange rates are determined by the state of the economy, inflation, interest rates, and GDP.

What can cause a currency to increase in value?

A currency might increase in value due to increased demand, a better state of the economy, or a decrease in supply.

What can cause a currency to fall in value?

A currency might decrease in value due to an increase in supply or a decrease in demand.

What happens to the value of the pound against the dollar when it rises?

If the value of the pound against the dollar rises, prices of exports to America increase and prices of imports from America fall.