360 You will “appreciate” this help

 A few of the Exam questions deal with Exchange Rates. Maybe these notes will be of help. (Also, Chapter 15 in our text gives some good information as well.)

• The exchange rate is the value of one currency in terms of another.
• Exchange rates are set by the market (buying and selling of currencies)
• When the dollar buys more of a foreign currency it has strengthened (appreciated). So if a year ago, one Dollar got 100 Japanese Yen and today it gets 120 Yen, the Dollar has appreciated. This makes Japanese goods cheaper for us and our goods more expensive for them.
• When the dollar buys less of a foreign currency it has weakened (depreciated)
• Purchasing power parity reflects the differences in the price level between two countries. 

  “Original document by Peter Turner licensed CC BY”