Answer :
It is true, the exchange-rate effect is the idea that a higher u.s. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.
An exchange rate is a rate at which one currency will be exchanged for another currency and affects trade and the movement of money between countries.
Both the domestic and foreign currency values have an impact on exchange rates. According to the July 2022 exchange rate of 1.02 between U.S. dollars and euros, $1.02 is needed to purchase one euro.
The economic activity, market interest rates, gross domestic product, and unemployment rate in each of the countries are frequently used to calculate the exchange rate between two currencies. They are sometimes referred to as market exchange rates and are determined in the 24-hour currency trading that takes place between banks and other financial institutions on the international financial market. Rate adjustments might happen hourly, daily, in big incremental shifts, or both.
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