Sunday, August 7, 2011
What depicts currency rates?
sorry if i am answering the wrong question, but if you mean the exchange rate, the dollar exchange rate does change, you just don't notice it changing because you live in the US. let's say you see in the newspaper that one dollar buys 43 rupees, when yesterday it bought 40, it seems to you that the rupee has become cheaper while the dollar has become more expensive, because you can still go to the corner store and buy a pack of cigarettes for $5.75. However, when someone in India opens the newspaper, it says one rupee now buys 1/43 dollars, when yesterday it bought 1/40, so to them it seems that the dollar has become more expensive while the rupee has stayed the same, because they can still go to the corner store and buy a pack of bidi's for Rs 50. However, what has happened is the relative price of the two currencies has changed, neither one stays the same. But because currency is traded instantly on a large global market, prices adjust instantly whereas the prices that you see in stores windows, are not, so prices take time to adjust.
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