Vocabulary
Exchange Rate
The price at which one currently can be exchanged for another.
Free Floating Exchange
A system in which the exchange rate is allowed to fluctuate based on supply and demand forces.
Gold Standard
A system in which a country backs its currency with gold.
Fixed Exchange Rate
A system in which the exchange rate for a country's currency is constant in relation to other countries.
Depreciation
A decline in the value of one currency in relation to another currency.
Appreciation
An increase in the value of one currency in relation to another currency.
Imports
Foreign goods that are sold domestically.
Exports
Domestically produced goods that are sold in other countries.
Net Exports
The value of a country's exports minus its imports.