POL208Y5 Lecture Notes - Lecture 15: Economic And Monetary Union Of The European Union, Linnean Society Of London, Floating Exchange Rate
Document Summary
Policy controlled by a country"s monetary authority (ex. central bank, currency board, or other regulatory committee) that affects broad macroeconomic conditions in that country, such as unemployment, inflation, and economic growth. Specifically, monetary policy operates through the management of the money supply, which is affected by modifying the interest rate and/or buying or selling government bonds. The price at which one currency is exchanged for another (fls 2016: 383: appreciation: When a currency increases in value in terms of another currency ( strengthened ) Makes it more expensive for foreigners to buy goods and services in the country: depreciation: When a currency decreases in value in terms of another currency ( weakened or. Makes it cheaper for foreigners to buy goods and services in the country. How are currency values determined: at root, currency values reflect changes in supply and demand. Higher interest rates generate foreign demand for the currency and lead to appreciation.
