Answered: Nation’s exchange rate value for its…

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: International Finance

Section: Chapter Questions

Problem 12QP

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Nation’s exchange rate value for its currency in foreign exchange markets. A nation's balance of trade if the nation's currency appreciates. Why?

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Definition Definition Difference in value of a country's net exports and net imports for goods and services in a given period. A positive balance of trade is called a surplus and coincides with more net cash inflows into a country; a negative balance of trade deficit is a deficit and results in net cash outflows. A balance of trade surplus or deficit doesn't necessarily indicate a positive or negative situation for a country.

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The exchange rate is the rate at which the currency of a nation is traded for the currency of another nation. The increase in the value of one currency with respect to the value of the currency of another nation(s) is known as currency appreciation in a floating exchange rate system.

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