Which term measures the value of one currency against another?

Which term measures the value of one currency against another?

• A. Deflation
• B. Interest Rates
• C. Exchange Rates
• D. VAT

Answer: (C)

Exchange rates show how valuable one currency is relative to another. They indicate how much of one currency you need to buy a unit of the other, or how much you get for a unit of the other when exchanging money. They can be quoted as the amount of a foreign currency per unit of domestic currency, or the reverse, and they move with supply and demand in currency markets, influenced by factors like interest rate differentials and inflation. The other terms don’t measure currency value: deflation is a fall in the overall price level, interest rates are the cost of borrowing money, and VAT is a tax on goods and services.

Exchange rates show how valuable one currency is relative to another. They indicate how much of one currency you need to buy a unit of the other, or how much you get for a unit of the other when exchanging money. They can be quoted as the amount of a foreign currency per unit of domestic currency, or the reverse, and they move with supply and demand in currency markets, influenced by factors like interest rate differentials and inflation. The other terms don’t measure currency value: deflation is a fall in the overall price level, interest rates are the cost of borrowing money, and VAT is a tax on goods and services.