AP MacroeconomicsInternational Trade & Finance
Exchange Rate
An exchange rate is the price of one country's currency expressed in terms of another currency.
It is set in the foreign exchange market by the supply of and demand for currencies. A higher exchange rate (appreciation) makes imports cheaper and exports more expensive. Exchange rates affect net exports and aggregate demand.
Formula / Example
Example: $1.10 per €1 means one euro costs $1.10.
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