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Exchange rates play a crucial role in international trade from "summary" of International Economics by Robert Carbaugh
Exchange rates are a fundamental aspect of international trade. They determine the value of one country's currency in terms of another, and thus have a crucial impact on the cost and competitiveness of goods and services in the global marketplace. When exchange rates fluctuate, they can have significant effects on the prices of imported and exported goods, altering the balance of trade between nations. In the context of international trade, exchange rates influence the demand for a country's exports and imports. A depreciation in the value of a country's currency makes its exports cheaper for foreign buyers, leading to an increase in demand for these goods. Conversely, a stronger currency can make a country's exports more expensive, reducing their competitiveness in the international market. This dynamic relationship between exchange rates and trade flows is a key consideration for policymakers and businesses engaged in global commerce. Exchange rate fluctuations can also impact the profitability of firms engaged in int...
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