Exchange Rates
The exchange rate between currencies is the number of units of one nation’s currency that equals one unit of another nation’s currency.
Exchange rates float, meaning they are determined by supply and demand for any given currency.
Demand for the dollar on exchange markets is determined by foreigners wanting to buy US goods with US dollars. When the dollar is “weak” the US exports more goods and services because they are relatively cheap to foreigners.
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For a fixed money supply, a higher level of real balances implies
A. a higher price level. B. a lower price level. C. higher velocity of money. D. lower velocity of money.
Money market mutual funds sell shares to investors and use the money to buy
A) overseas assets through foreign direct investment. B) short-term securities. C) foreign currency. D) mortgage-backed securities.