Economics 101 (#30) Currencies and Exchange Rates

February 6, 2012

A currency is essentially like any other good. It follows the law of demand and the law of supply and prices of it adjust accordingly (more abundant, the lower its price/value – the more scarce, the higher its price/value). Currencies facilitate trade because trade needs an established price value of goods. This price is expressed in a local currency i.e. US$, EUR€, GBP£ and others, and it determines demand for a good. As a result, the price of a currency determines demand for what you produce which determines how much you sell (as exports) and how much money you make as an economy. The price of a currency relative to another is called the exchange rate.

Heres the PDF PIIGSty Econ 101 #30 Currencies and Exchange Rates

A ‘strong’ currency isn’t necessary a good thing….