Exchange rate agreements determine how much a country's money is worth compared to other countries. These rates are influenced by buyers, sellers, and financial institutions trading foreign currencies. Interest rates and market conditions affect exchange rates, with higher rates leading to currency appreciation. The purchasing power parity theory explains long-term exchange rate trends, while factors like tariffs and productivity growth impact the equilibrium rate. Overall, exchange rates are influenced by a variety of economic factors and can change based on market conditions and government policies.