top of page

Economics explained


Exchange rates

Exchange rates

Exchange rates

The secret to scoring awesome grades in economics is to have corresponding awesome notes.
A common pitfall for students is to lose themselves in a sea of notes: personal notes, teacher notes, online notes textbooks, etc... This happens when one has too many sources to revise from! Why not solve this problem by having one reliable source of notes? This is where we can help.
What makes TooLazyToStudy notes different?
Our notes:
  • are clear and concise and relevant
  • is set in an engaging template to facilitate memorisation
  • cover all the important topics in the O level, AS level and A level syllabus
  • are editable, feel free to make additions or to rephrase sentences in your own words!

    Looking for live explanations of these notes? Enrol now for FREE tuition!

Nominal exchange rates

The nominal foreign exchange rate is the price of one currency in terms of another currency; that is, the price of the domestic currency in terms of a foreign currency.

All exchange rates that you see quoted in the newspapers, on television or the Internet, or at travel agents, banks or airports, are nominal rates.

If a company trades overseas, it will buy or sell assets in foreign currencies. For example, an American company might buy materials from Canada, and pay for them in US dollars, and then sell its finished goods in Germany, receiving payment in Euros, or perhaps in some other currency.

Trade weighted exchange rate

A trade-weighted exchange rate is a measure, in index form, of the value of a currency against a basket of currencies. These are weighted according to the relative importance of the countries in the country’s trade.

Real effective exchange rate

A real effective exchange rate is a country’s exchange rate adjusted for changes in the domestic currency prices of its exports relative to the foreign currency prices of its imports.

If a country’s prices rise (fall) relative to those of its trading partners, its real exchange rate will rise (fall) relative to the nominal exchange rate

bottom of page