Economics Exchange Rates Questions
Exchange rates play a crucial role in maintaining international financial stability. They determine the value of one currency in relation to another, which affects the competitiveness of a country's exports and imports. Stable exchange rates promote economic stability by reducing uncertainty and facilitating international trade and investment. They also help in maintaining balance of payments equilibrium and preventing excessive fluctuations in currency values, which can lead to financial crises. Additionally, exchange rates influence capital flows, interest rates, and inflation rates, all of which impact a country's overall economic stability.