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Mental models cause us to:
International Monetary System
The framework of rules, institutions, and agreements by which countries exchange currencies and settle international financial transactions.
Flexible Exchange Rate
Rate determined in foreign exchange markets by the forces of demand and supply without government intervention.
Fixed Exchange Rate
A currency system where the value of a currency is pegged to another currency, a basket of currencies, or a physical commodity like gold.
Exchange Rate
The price of one currency in terms of another, determining how much foreign currency can be exchanged for a unit of domestic currency.
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