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Carlos Vargas-Silva

In: 21st Century Economics: A Reference Handbook

Chapter 42: Exchange Rates

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Exchange Rates
Exchange rates

Every day, millions of companies and individuals around the world do business with companies and individuals located in different countries. Often these transactions involve two or more currencies. Juanita, a resident of the United States, wants to send her grandmother in Mexico money to buy a new microwave. Juanita earns income in U.S. dollars, but her grandmother needs Mexican pesos to buy the microwave in Mexico. Juanita knows that the microwave costs 20,000 Mexican pesos. How many U.S. dollars would she need to send to her grandmother? This example is just one of many situations in which there is a need for a foreign exchange transaction. Individuals and companies enter into millions of foreign exchange transactions every day. The standard for how ...

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