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What Is an Exchange Rate and How Is It Related

question 74

Essay

What is an exchange rate and how is it related to its balance of payments? What are the four fundamental determinants of a country's exchange rate and what is likely to happen to the exchange rate in the following cases?
(1)A fall in the U.S.interest rate relative to interest rates abroad (dollar).
(2)A higher inflation rate in Japan compared to other countries (yen).
(3)A severe recession in Europe (euro).
(4)The U.S.imposes a 15% tariff on Japanese imported cars (dollar).


Definitions:

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A set of circumstances that makes it possible to achieve something or a situation that offers the chance for progress or advancement.

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A term used by Karl Marx, metaphorically describing religion's effect on people as a soothing but illusionary escape from their distress.

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A reference to Karl Marx, a 19th-century philosopher, economist, and revolutionary known for his critical analysis of capitalism and his influence on socialist thought.

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A state church or an organized religion that is closely integrated with the political and social structure of a society, often holding significant influence.

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