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How do changes in interest rates inflation productivity and income affect exchange rates?
Wiki User
∙ 12y ago
Some countries simply allow the exchange rate to be determined by demand and supply. Some countries attempt to keep the exchange rate between their currency and another currency constant. When countries agree to keep the value of their currencies constant, there is a fixed exchange and is called exchange rate system. Exchange rate or value of a currency is defined by its supply and demand factors. If a country has high interest rate, that will attract more investors to buy that currency to invest (increase in demand for the currency). If inflation is high, the value of the currency decreases over time and therefore not attractive to hold (decrease in demand). If the country has high productivity and does a lot of exports, foreigners will need to buy currency in order buy the goods (increase in demand).
Wiki User
∙ 12y ago
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What determines supply and demand in the foreign-exchange market?
Supply and demand in the foreign-exchange market are determined by changes in many market variables, including relative price levels, real interest rates, productivity, product preferences, and perceptions of economic stability.
What is point to point inflation?
Point inflation is the point at which the curve changes its shape with the fixed rate of change. Point to point is the distance between the changes.
To reduce the level of inflation monetarists advocate a a sharp increase in short term interest rates b steady and predictable changes in the money supply c a decrease in govt spending?
The Answer is B) Steady and predictable changes in the money supply.
What is base effect in inflation?
When changes in the CPI in the base month have a considerable effect on twelve-month measured inflation, this is commonly referred to as a base effect. Base effects are therefore the contribution to changes in the annual rate of measured inflation from abnormal changes in the CPI in the base period.
What is deflation in economics?
Deflation is when prices on average go down without productivity increases or technology changes making this happen. So the prices of computers going down is not deflation because technology changes have made this happen. This happens because there are fewer dollars in circulation This is the opposite of inflation where the prices increase.
What are the factors that drives interest rate up?
Factors that greatly affects interest rate, whether an increase or decrease, are economic and political stability. To list a few: Country's Inflation (exchange rate). Country's legislative changes.
What are the Reasons for fall in money value?
Changes in fiscal policy Inflation rate Interest rate
What determines supply and demand in the foreign-exchange market?
Supply and demand in the foreign-exchange market are determined by changes in many market variables, including relative price levels, real interest rates, productivity, product preferences, and perceptions of economic stability.
What is the inflation rate if nominal wages increase by 3 percent and labor productivity increases by 1 percent?
103/101 = 1.0198 So, if there are no other changes, (eg in capital productivity) inflation is 1.98 %. For small percentage changes, it is usually safe to take 3% - 1% = 2% since the estimation error in these figures is likely to be greater than the rounding error between 1.98 and 2.0
How does exchange rates depreciation affect the south African economy?
Exchange rates depreciation affect the south African economy because it leads to changes in inflation in the country' economy .
Improving marketing product changes for effective productivity?
Improving marketing product changes for effective productivity?
How are inflation and unemployment related in Singapore?
Changes in wages imply changes of inflation in Singapore or most other countries. The Philips curve shows how inflation and and unemployment is related.
What is point to point inflation?
Point inflation is the point at which the curve changes its shape with the fixed rate of change. Point to point is the distance between the changes.
Which factors affect rate of interest?
Fist and fore most is NEED. Then the inflation. Third availability of money in the market i If the returns are less on the already made investments the availability of money will be less in the market. There by increase in the interest rates. Also changes in the economic condition will affect the interest rates.
To reduce the level of inflation monetarists advocate a a sharp increase in short term interest rates b steady and predictable changes in the money supply c a decrease in govt spending?
The Answer is B) Steady and predictable changes in the money supply.
What is base effect in inflation?
When changes in the CPI in the base month have a considerable effect on twelve-month measured inflation, this is commonly referred to as a base effect. Base effects are therefore the contribution to changes in the annual rate of measured inflation from abnormal changes in the CPI in the base period.
What is deflation in economics?
Deflation is when prices on average go down without productivity increases or technology changes making this happen. So the prices of computers going down is not deflation because technology changes have made this happen. This happens because there are fewer dollars in circulation This is the opposite of inflation where the prices increase.
