# Tag Info

Accepted

### How is it possible that all currency exchange rates are fixed w.r.t. to each other?

International currency markets are highly liquid, with near-instant transfer of knowledge between trading centres. This means that any arbitrage opportunities tend to get resolved within seconds. To ...
• 7,992

### Real Exchange Rate vs PPP rate

There are several exchange rate concepts that need to be distinguished. There are bilateral and multilateral (aka "effective") exchange rates, nominal and real exchange rates, and market-price versus ...
• 420
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### What would happen if the world switched to a single currency?

The Euro was always conceived by most Economists as a political goal, not an economic one. Prologue: There is the theory of Optimum Currency Areas (OCA) which characterizes properties that a larger ...
• 10.4k
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### How does a country devalue its currency?

Typically, a devaluation is achieved by selling the domestic currency in the foreign exchange market and buying other currencies. Suppose China sells one trillion Renminbi and buys 157 billion US ...
• 16.6k

### What are the differences between the older gold standard and the current fiat money standard?

The gold standard in the US was actually kind of complicated. You had the government issuing notes off of gold, and private banks issuing bank notes off of gold...but also banks issuing notes/...
• 1,070
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### Why currency purchasing power is linked to confidence in central banks

TL;DR Version: The trust that money has value gives it its value. If money can be exchanged for gold, then this makes people trust that it will have value. If this is not the case (and it is not, ...
• 5,394
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### Do import tariffs tend to increase a country's exchange rate (if so, why)?

Suppose that there is no 45 percent tariff and the market is in some kind of equilibrium. That is the demand for yuans equals the supply of yuans at the current exchange rate. Now assume Trump does ...
• 26k

### Theoretical market capitalisation of a crypto currency?

As there is no practical limit on the number of cryptocurrencies that can be created, and as no one crpytocurrency has a unique advantage over any other, and as no cryptocurrencies are legal tender ...
• 7,992
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### Demand Curve of Foreign Exchange

At market both price (in this case exchange rate) and quantity are endogenous ('dependent') variables. You are confusing two completely distinct phenomena. Movement along demand curve and shifts in ...
• 41.5k

### What does the price of bitcoin per ounce of gold tell us?

It's BTC per Oz gold which shows how many btc you need to pay for 1oz. To compute this, you need to know the price (and both are quoted in USD). It still tells you a lot about the purchasing power. A ...
• 136