Which of the following affects the trading of all international financial instruments?

Question

Quizplus · Accepted Answer

The exchange rate, which is the value of one country's currency compared to another's, affects the trading of all international financial instruments because it impacts the cost of borrowing and lending in different currencies. A higher exchange rate can make imports cheaper and exports more expensive, driving up demand for a country's currency and affecting its trade balance. On the other hand, a weaker exchange rate can increase the competitiveness of a country's exports and reduce its trade deficit, but it can also raise inflation and interest rates. The federal funds rate, discount rate, and prime rate only affect domestic borrowing and lending in the US, and have a more limited impact on international financial markets.

Which of the Following Affects the Trading of All International