Glossary · Macro · Open economy

Exchange rate

The price of one currency in terms of another, like 0.9 euros per dollar. It is set in the foreign exchange market, where demand for a currency comes from foreigners who need it to buy that country’s goods and assets, and supply comes from residents buying abroad.

Also called: nominal exchange rate, foreign exchange market, forex

Practice reading the foreign exchange market graphTaught in: Trade & Exchange Rates

Related terms

AppreciationDepreciationReal exchange rateWhat moves exchange rates

More from open economy

Balance of paymentsCapital and financial accountCurrent accountFixed vs floating exchange ratesImpossible trinityJ-curve

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