Understanding Exchange Rates

The video explains exchange rates as the price at which one currency trades for another, highlighting the role of supply and demand in a floating exchange rate system. It discusses the effects of currency appreciation and depreciation on a country's competitiveness. The video contrasts floating and fixed exchange rate systems, emphasizing the flexibility of floating rates and the stability of fixed rates. It also covers central bank interventions to maintain exchange rate stability and underscores the importance of understanding exchange rates in global trade.

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