The     can be described as the value of one currency expressed in terms of   .

rate  different  another  currency  exchange 

     systems are exchange rate systems where by the currency rate is determined by   and demand, without outside influence from the .  In reality there are no genuinely              systems in the world.

  rate  supply  exchange  free  government  Floating  currency  rate  exchange  Fixed  floating 

The supply of any currency is determined by the level of domestic demand for goods and services, the level of overseas , remittances sent overseas as well as currency by speculators.

investment  net  imported  exported  transfers 

The   for a currency comes from demand for a country’s   , the level of investment by overseas citizens in a nation, foreign currency derived from remittances from abroad and looking to make a profit on changes in currency values.

  imports  demand  exports  supply  speculators 

The determinants of the market for a currency include the relative popularity for a nation's   ,      level, relative income levels,  rates and investment transactions. 

average  goods  interest  investment  price  products 

- when the value of a nation's currency falls, relative to other currencies, as a result of a deliberate policy decision by the   or   .

bank  central  depreciation  Revaluation Depreciation   government  Devaluation 

- when the value of a nation's currency rises, relative to other currencies, because of a deliberate policy decision made by the government or central bank.

Appreciation  Revaluation 

 - when the value of a nation's currency falls, relative to other currencies, as a result of a market forces, rather than deliberate actions of the government or      .

central  bank  monetary  policy  Depreciation  Devaluation 

- when the value of a nation's currency rises, relative to other currencies, as a result of forces, rather than deliberate actions of the or   .

central  bank  government  market  Appreciation  Revaluation  Monetary  policy 

Following a fall in the value of a currency a nation would expect to see a rise in      but a fall in consumption as       eats into real wage levels.

inflation  demand  aggregate  push  cost  exports  demand  net  pull 

A        system is an exchange rate regime applied by a government or central bank which ties a country's  official exchange rate to another country's currency (usually the $ or Є) or the price of gold.

rate  exchange  fixed  floating 

A     system is the exchange rate system employed by many modern economies.  Under this system the exchange rate is allowed to fluctuate, but     will influence the exchange rates to maintain a certain range.

  managed  floating  fixed  exchange  banks  rate  central 

Some of the advantages of a fixed exchange rate system are that it provides greater for traders and makes it easier for     in LEDCs to control   .  A fast growing LEDC, which fixes its exchange rate, may also be able to attract significant   of foreign capital.

government  inflation  departments  banks  central  inflows  stability  outflows 

The disadvantages of a        system are that a nation with a       may find it particularly vulnerable to a sudden drop in the price of its    or a surge of foreign capital.  Many LEDCs may also find it difficult to allocate sufficient foreign currency reserves to the central bank so that it can implement the plan.

 rate  exchange  fixed  floating exports  imports  supply shock