300 wordsAPA Formatted References One of the major complaints regarding foreign exchange rates and flexible exchange rates is that the exchange rates are too volatile when they float. Define how the...

Trade Balance
The value of all goods and services sold by a country to other country minus the value of all
goods and services purchased by the country from other country is termed as Trade Balance.
If the value of export is more than the value of import, country would have trade surplus. If
import is more than export country would have trade deficit.
A change in exchange rate greatly impacts the economy of the country. If a country is enjoying
trade surplus it means that the exchange rate is falling i.e. value of dollar is relatively cheaper as
compared to other currency. If there is a trade deficit, then exchange rate will be higher, i.e. the
value of US dollar is relatively higher as compared to other countries’ currency.
Currency Substitution
It is the use of foreign currency in place of domestic currency. The foreign currency serves as a
medium of exchange...