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Q. Define Exchange rate systems?
Different nations have different exchange rate systems. The most significant characteristic of an exchange rate system is to what degree the country is trying to control exchange rate.
The most common exchange rate system in western world during previous century was fixed exchange rate system. Up to 1930s, most currencies were pegged to price of gold (gold standard). After Second World War a new system was created, so-called Bretton Woods system, where every currency in the system was pegged to US dollar (USD). After the collapse of this system in 1970s, many currencies, for instance, USD, have been flexible.
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factor for long run trend of term of trade
Definition of Exchange rate The exchange rate is stated as the price of one unit of currency in terms of other currency. If one euro costs 1.5 USD then 1 USD costs 1/1.5 = 0.66
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