Determine the exchange rate

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How would you repond to this discussion question:foreign exchange rates are determined by supply and demand. Using the supply and demand curve, the intersection of the curves for a certain currency will help determine the exchange rate. The rates are consistently changing. If the rate is high, then one country will want less supply or service and another country will produce more of the supply or service since they will get more for it. When a country's income changes,, it affects the demand for imports. When the income falls, the import demand will fall. when interest rates are high, it attracts foreign capital and the exchange rate rises. Lowered interest rates cause the exchange rate to decrease. Inflation causes the currency to decrease over time which will make the demand decrease. When productivity is high, then the demand rises since foreigners will need more currency to buy the goods or services. A strong dollar holds down the price of imports while the costs for exports are down and productivity is higher. A strong dollar attracts foreign investments. A weak dollar has no affect on local goods. It makes a country's goods cheaper in a foreign country.

Reference no: EM13150854

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