ECON lesson 16 : exchange rates
movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ____________ in the economy as a whole.
aggregate demand
from a macroeconomic point of view, increases in _______________ are an addition to aggregate demand, while increases in ____________ are a subtraction from aggregate demand
exports; imports
people or firms use one currency to purchase another currency at the ____________
foreign exchange market
the ____________ is the largest market in the world economy.
foreign exchange market
expansionary monetary policy lowers _____________, and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ____________.
interest rates; right
if Australia's exchange rate is stronger than the PPP rate for several years, which of the following will likely result?
it's imports will increase
when a government uses a ___________ Exchange rate policy, it usually allows the exchange rate to be set by the market.
soft peg
For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits.
swings in exchange rates
Exchange rates are an effective way to analyze the price of one currency in terms of another currency with ______________
the tools of demand and supply
a _______________ monetary policy can be used to decrease aggregate demand because it ______________ exports and ______________ imports
tight; stimulates; reduces