I need an explanation for this English question to help me study.
Final exam. Pick 4 of the following 6 questions.
- Explain how exchange rates are considered a self-correcting mechanism of international trade.
- Explain with examples (at least 3) of arbitrage in exchange rates.
- Explain how a country’s balances of payment directly affect the exchange rate.
- Explain the many reasons why companies locate outside of their home country.
- Explain how the balance of payments is balanced. What pays for a current account defeicit or a capital account surplus.
- Explain the relationship between interest rates and exchange rates.