What defines "currency exchange rates" in economics?

Currency exchange rates are defined as the value of one currency in relation to another currency. This measurement allows for the conversion of currencies, facilitating international trade and investment. Understanding exchange rates is crucial because they affect the relative prices of goods and services across countries, influencing everything from import and export dynamics to foreign investment decisions.

When assessing the importance of the correct answer, consider that exchange rates directly impact how much of one currency you need to spend to obtain another. This can affect travel costs, international business revenue, and global market competitiveness.

The other options do not accurately define currency exchange rates. Interest rates set by central banks play a role in influencing exchange rates but are not themselves a measure of currency conversion. The total money supply in an economy refers to the amount of money available in the economy and does not directly relate to the relative value of one currency against another. Lastly, the value of goods in a particular market pertains to pricing and supply-demand dynamics of specific products, rather than being a measure of how currencies relate to one another.