338 Some help for the exam

The last few questions on the exam deal with exchange rates. Many of you know about this anyway, but here are a few hints:

• 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)
• When the dollar buys less of a foreign currency it has weakened (depreciated)
• Purchasing power parity (Q. 22) reflects the differences in the price level between two countries.

“Original document by Peter Turner licensed CC BY”