Question : The exchange rate is the price of one __________in terms of another___________.
Option 1: currency, currency
Option 2: import, export
Option 3: goods, services
Option 4: investment, remittance
Correct Answer: currency, currency
Solution : The correct answer is (a) currency, currency
The exchange rate is the price at which one currency can be exchanged for another currency. It represents the value of one currency in terms of another currency. For example, if the exchange rate between the US dollar and the euro is 1.10 , it means that 1 US dollar can be exchanged for 1.10 euros. The exchange rate is determined by various factors such as supply and demand in the foreign exchange market, interest rates, inflation rates, and market expectations. It plays a crucial role in international trade and financial transactions.
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