Exchange rate
Definition. An exchange rate is the price of one currency expressed in terms of another currency, determining how much foreign currency a unit of the domestic currency can buy. A rise in this price is an appreciation and a fall is a depreciation, which alters the relative prices of exports and imports.
The Marshall Lerner condition states that a depreciation improves the trade balance only if the combined price elasticities of demand for exports and imports exceed one.
This term belongs to The Marshall Lerner Condition in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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