GB 540 Unit 6 Discussion 3 Quantity supplied and demanded for products change as the prices of the products change. Similarly, supply and demand for foreign currency result in changing prices of a currency. The price of a currency changes as demand for foreign currencies changes. This price of foreign currency, in terms of U.S. currency, is known as the foreign exchange rate. Exchange rate simply indicates how many USA dollars it will cost us to purchase a unit of foreign currency. This floating foreign exchange rate changes daily with the international supply and demand for currency. 1. What are the impacts of currency devaluation and revaluation on international trade? 2. What are the factors that increase and decrease the demand for a foreign currency? 3. What is the difference between pegged currency (fixed exchange rate) and floating exchanged? What are their pros and cons of the two forms of the exchange rates? 4. What is currency war? How does it affect trade between countries?
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