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JAMB Economics 1987 Question 42

Question 42

Balance of Payments and Exchange Rates

The rate of exchange between a domestic and a foreign currency is defined as the

  1. A.terms of trade
  2. B.domestic currency price of a unit of the foreign currency
  3. C.foreign currency price of gold
  4. D.domestic currency price of gold.
Show the answer and explanation

Answer: B (domestic currency price of a unit of the foreign currency)

Explanation

The exchange rate is the price of one currency in terms of another, e.g. how many naira buy one dollar.