Explain the Economic Pressures That Will Come to Bear on the Exchange

question 94

Essay

Explain the economic pressures that will come to bear on the exchange rate if there is a high rate of inflation in one country relative to another.

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Definitions:

Treasury Bonds

Long-term government securities issued by the U.S. Department of the Treasury. They carry a fixed interest rate and have maturities ranging from 20 to 30 years.

Money Supply

The comprehensive sum of all available financial assets within an economy at a particular time, including cash, coins, and account balances in checking and savings.

Reserve Requirement

The lowest level of reserves that financial institutions are required to maintain against deposits, determined by central banks to manage the amount of money in circulation.

Fed

In the United States, the Federal Reserve System serves as the central banking authority, charged with the management of monetary policy.