ECON 1010 Chapter 25: Chapter 25 Notes part 1
Document Summary
Foreign currency is the money of other countries in the form of notes, coins, or bank deposits. The currency of one country is exchanged for the currency of another in the foreign exchange market. The foreign exchange market is made up of thousands of people including specialists traders called foreign exchange brokers. An exchange rate is the price at which one currency exchanges for another currency in the foreign exchange market. A rise in the exchange rate is called an appreciation of the dollar. A fall in the exchange rate is called a depreciation of the dollar. For example, when the exchange rate rises from 79 yen to 100 yen per dollar, the dollar appreciates. An exchange rate is a price the price of one currency in terms of another. An exchange rate is determined in the foreign exchange market. Since the foreign exchange market has many traders and no restrictions on trades it is a competitive market.