MKT-5.A—a. Define the exchange rate, currency appreciation, and currency depreciation. b. Explain how currencies are valued relative to…

a. Define the exchange rate, currency appreciation, and currency depreciation. b. Explain how currencies are valued relative to one another. c. Calculate the value of one currency relative to another.

• In the foreign exchange market, one currency is exchanged for another; the price of one currency in terms of the other is the exchange rate.
• If one currency becomes more valuable in terms of the other, it is said to appreciate. If one currency becomes less valuable in terms of the other, it is said to depreciate.
• Enduring understanding MKT-5: The interaction of buyers and sellers exchanging the currency of one country for the currency of another determines the equilibrium exchange rate in a flexible exchange market and influences the flow of goods, services, and financial capital between countries.