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If by that you mean what happens if one country's currency appreciates relatively to the rest of the world, then country's exports sell less (because they become more expensive for the foreigner), while its imports increase (because they are cheaper now for the domestic consumer); thus the balance of trade is decreased (because the country is spending more on imports relative to its sales of exports).
What else can I help you with?
How do fluctuations to the international exchange rate of a nation's currency affect its balance of trade?
Helps the balance.
What happen to the exchange rate when there is a zero trade balance?
When a country has a zero trade balance, it means that its exports and imports are equal, resulting in no net flow of currency due to trade. In this scenario, the exchange rate may stabilize, as there is no pressure on the currency to appreciate or depreciate due to trade imbalances. However, other factors, such as capital flows and interest rates, can still influence the exchange rate. Overall, a zero trade balance can contribute to a more stable exchange rate environment.
The open-economy macroeconomic model examines the determination of?
the trade balance and the exchange rate.
What is the purpose of an exchange rate?
It's important to know the strength of the country's economy through the stability of exchange rate movement and the degree of change, and to know how the economy of the country's trade balance is during any movement of export s and imports. It's also affects the exchange rate on the purchasing power of the individual. In addition, exchange rate benefits by knowing the government policies wither economically or politically, as it affect stability in general and a stable exchange rate for the local currency against foreign currency.
How does a country balance of payments affect the value of its currency?
can cause fluctuations in the exchange rate between its currency and foreign currencies.
What is forward rate?
Forward exchange rate is the agreed upon exchange rate to be used in a forward trade.
How does the exchange rate affect the five macroeconomic objectives?
The exchange rate influences the five macroeconomic objectives—economic growth, unemployment, inflation, and balance of payments—by affecting trade competitiveness and capital flows. A weaker currency can boost exports by making them cheaper for foreign buyers, potentially stimulating economic growth and reducing unemployment. Conversely, it can increase import costs, leading to inflation. Additionally, fluctuations in exchange rates can impact foreign investment and the balance of payments, as they affect the value of international transactions.
How does the exchange rate affect Britain?
Exchange rate is depends on the rate of that country currency rates and gold!
Why does Japanese currency have a weak exchange rate?
The Japanese currency has a weak exchange when compared to the major external currencies due to the difference in their trade balance and poor internal economic factors
What is the current exchange rate for EUR/USD and how does it impact international trade?
The current exchange rate for EUR/USD is 1.18. This rate impacts international trade by influencing the cost of importing and exporting goods between the Eurozone and the United States. A higher exchange rate means it is more expensive for US buyers to purchase goods from the Eurozone, while a lower exchange rate makes Eurozone goods more affordable for US buyers. This can affect the competitiveness of businesses in both regions and impact trade volumes.
What will happen to the trade balance and the real exchange rate of small open economy when government purchase increase such as during a war.?
When government purchases increase, particularly during a war, the trade balance of a small open economy typically deteriorates. This is because higher government spending can boost domestic demand, leading to increased imports. As demand for foreign goods rises, the trade balance moves towards a deficit, which can exert downward pressure on the real exchange rate. Consequently, the real exchange rate may depreciate, making exports cheaper and imports more expensive, potentially stimulating future export growth.
What are the effects of exchange rate fluctuation?
Exchange rate fluctuations can significantly impact international trade, as a stronger domestic currency makes exports more expensive and imports cheaper, potentially reducing export competitiveness. Conversely, a weaker currency can enhance export demand but increase the cost of imported goods and services, potentially leading to inflation. Additionally, exchange rate volatility can affect foreign investment decisions and financial markets, as investors may seek stability in their returns. Overall, these fluctuations can influence economic growth, inflation rates, and the balance of trade.
