2.2.3 Exchange rates

Definition of exchange rates.

Factors affecting supply and demand of currencies:

• interest rates
• currency speculators
• imports and exports of goods and services
• supply and demand diagrams to show determination of exchange rates.

Definition of appreciation:

• definition of revaluation
• impact of appreciation of exchange rate on:
  • import and export prices
  • demand for imports and exports
  • current account on balance of payments.

Definition of depreciation:

• definition of devaluation
• impact of depreciation of exchange rate on:
  • import and export prices
  • demand for imports and exports
  • current account on balance of payments.