Chapter 11, Problem 11.5Q

To determine

Introduction:A countries currency is much like other commodities, and the exchange rates changes because of a number of economic factors affecting the supply and demand for nation’s currency. If a nation is experiencing high level of inflation, the purchasing power of its currency decreases. This decrease in the value of currency is reflected by a decrease in the positioning of the country’s currency relative to the other nations’ currencies, other factors causing exchange rate fluctuations are nation’s balance of payments changes in the countries exchange interest rate and investment levels, and stability and process of governance.

To explain:The types of economic factors affecting currency exchange rates with an example for change in an economic factor wakening of the local currency versus a foreign currency.