When the value of a country's currency declines relative to other currencies, the currency is said to ______________.

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Ronaldo MendozaLv10

12 Oct 2020

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Foreign exchange markets make it possible for trade to be enacted between countries without lengthy negotiations on trade terms. The exchange rate mechanism is a relatively stable process whereby different currencies can be exchanged in an orderly manner in conformity to the rules of currency exchange rates. Factors, such as the relative inflation and unemployment rates between the trading partners, affect the value of each country's currency in relation to the other countries' currency. The country with higher inflation and unemployment will have the lower valued currency.

(A.) Why is the foreign currency exchange market important to a business?

(B.) What is the benefit of the foreign currency exchange market to the U.S. company?

(C.) If the U.S. currency is decreasing versus other currencies of countries it trades with, how will that affect the U.S. company? If the reverse is true, how will that affect the US company?

orchiddonkey965

The advantages of manufacturing goods in a particular country and exporting them to foreign markets:

A. Are significantly enhanced when that particular country's currency grows weaker relative to the currencies of the countries where the products are being exported and sold.

B. Are largely unaffected by fluctuating currency exchange rates.

C. Are largely unaffected by issues of country to country import policies and cultural differences.