1
Q
nominal exchange rate
A
- rate at which one currency is exchanged by another
- where e expresses amount of foreign currency one AUD can buy
2
Q
how is exchange rate determined?
A
- supply and demand for currency
3
Q
purchasing power parity
A
- does not work well as
- > some goods are not traded internationally
e. g. hairdressing, agricultural land, highly preishable food items
