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