Transcript forex

New Application of Supply and
Demand
The Foreign Exchange Market
FOREX
Supply and Demand and Exchange
Rates
• If Americans want to buy foreign goods/services
then they need the currency that the people in
the foreign country use from day to day.
• If Foreigners want to buy American made
goods/services, then they need the currency that
people in the U.S. use from day to day.
– This currency exchange MUST be made somewhere
along the process of trade!!
Currency (money) is a commodity just like any other
good/service – its value is determined by the forces of
supply and demand – we can’t escape it!!
There are two major reasons for
exchanging currencies
• A desire to buy the goods/services of a
foreign supplier.
– Change in Tastes
– Change in Quality
– Change in relative price levels
– Change in relative wealth (GDP)
• A relative change in Interest Rates that
investors can earn.
Change in Tastes effect on the
Exchange Rate
• Suppose Foreigners want the latest
computer produced by Dell Computers.
– To do this they will need U.S. dollars because
Dell computer wants dollars, not Euros,
Pesos, Yen, Yuan, etc.
• Foreigners will have to exchange their
currency for dollars. The Supply of the Foreign
Currency in the currency market will
INCREASE as Foreigners give up their
currency and increase their DEMAND for U.S.
Dollars.
Market for Euros
Exchange
Rate
Supply of Euros
Dollar Price
Per Euro
S€1
$*
$1
Demand for Euros
€*
€1
Quantity of Euros
Market for Dollars
Exchange
Rate
Supply of Dollars
€1
€*
Euro Price
Per Dollar
D$1
Demand for Dollars
$*
$1
Quantity of Dollars
What is the effect on the Exchange
Rate?
• The Dollar price per Euro decreases (it
becomes cheaper for us to buy) and the
Euro Price per Dollar increases (it
becomes more expensive for Europeans
to buy dollars)
• The Dollar has APPRECIATED in value
relative to the foreign currency.
– We can purchase more goods from the
Europeans because the dollar buys more of
their currency.
What effect does the exchange rate
between currencies have on Exports
and/or Imports?
• If the price of a dollar RISES relative to a foreign
currency then it is said that the Dollar has
APPRECIATED (gotten stronger) in value.
– The dollar can now purchase more of the foreign currency than it could
before. Foreign goods are now less expensive because our dollars can
now purchase more of their goods than before. On the other hand, foreign
currencies have DEPRECIATED in value relative to the dollar so our
currency is more expensive to buy and our goods become relatively more
expensive for foreigners to buy.
IMPORTS WILL INCREASE AND EXPORTS
WILL DECREASE WHEN THE DOLLAR
APPRECIATES IN VALUE RELATIVE TO
OTHER CURRENCIES
Interest Rate effect on
the Exchange Rate
• Suppose the Interest Rate in U.S. is
HIGHER relative to the Interest Rate in the
Rest of the World.
– Foreigners will want to invest in the U.S
because they can get a higher interest rate.
To do this they will need U.S. dollars.
• Supply of the Foreign Currency in the currency
market will INCREASE as Foreigners give up
their currency and increase their DEMAND for
U.S. Dollars.
Market for Euros
Exchange
Rate
Supply of Euros
Dollar Price
Per Euro
S€1
$*
$1
Demand for Euros
€*
€1
Quantity of Euros
Market for Dollars
Exchange
Rate
Supply of Dollars
€1
€*
Euro Price
Per Dollar
D$1
Demand for Dollars
$*
$1
Quantity of Dollars
What is the effect on the Exchange
Rate?
• The Dollar price per Euro decreases (it
becomes cheaper for us to buy) and the
Euro Price per Dollar increases (it
becomes more expensive for Europeans
to buy dollars)
• The Dollar has APPRECIATED in value
relative to the foreign currency.
– We can purchase more goods from the
Europeans because the dollar buys more of
their currency.
What effect does the exchange rate
between currencies have on Exports
and/or Imports?
• If the price of a dollar RISES relative to a foreign
currency then it is said that the Dollar has
APPRECIATED (gotten stronger) in value.
– The dollar can now purchase more of the foreign currency than it could
before. Foreign goods are now less expensive because our dollars can
purchase more of their goods. On the other hand, foreign currencies have
DEPRECIATED in value relative to the dollar so our currency is more
expensive to buy and our goods become relatively more expensive for
foreigners to buy.
IMPORTS WILL INCREASE AND EXPORTS
WILL DECREASE WHEN THE DOLLAR
APPRECIATES IN VALUE RELATIVE TO
OTHER CURRENCIES
Change in Tastes effect on the
Exchange Rate
• Suppose Americans develop a taste for a
vintage wine produced and sold in France.
– To do this they will need Euros because the
French wine producers want Euros, not
Dollars.
• Americans will have to exchange their currency
for Euros. The Supply of the Dollars in the
currency market will INCREASE as Americans
give up their currency and increase their
DEMAND for Euros.
Market for Dollars
Exchange
Rate
Supply of Dollars
S$1
Euro Price
Per Dollar
€*
€1
Demand for Dollars
$*
$1
Quantity of Dollars
Market for Euros
Exchange
Rate
Supply of Euros
$1
$*
D€1
Dollar Price
Per Euro
Demand for Euros
€*
€1
Quantity of Euros
What is the effect on the Exchange
Rate?
• The Dollar price per Euro increases (it
becomes more expensive for us to buy)
and the Euro Price per Dollar decreases (it
becomes less expensive for Europeans to
buy dollars)
• The Dollar has DEPRECIATED in value
relative to the foreign currency.
– We can purchase fewer goods from the
Europeans because the dollar buys less of
their currency.
What effect does the exchange rate
between currencies have on Exports
and/or Imports?
• If the price of a dollar is LOWER relative to a
foreign currency then it is said that the Dollar
has DEPRECIATED (gotten weaker) in value.
– The dollar can now purchase less of the foreign currency than it could
before. Foreign goods are now more expensive because our dollars can
purchase less of their goods. On the other hand, foreign currencies have
APPRECIATED in value relative to the dollar so our currency is less
expensive to buy and our goods become relatively cheaper for foreigners
to buy.
IMPORTS WILL DECREASE AND EXPORTS
WILL INCREASE WHEN THE DOLLAR
DEPRECIATES IN VALUE RELATIVE TO
OTHER CURRENCIES
Interest Rate effect on
the Exchange Rate
• Suppose the Interest Rate in U.S. is
LOWER relative to the Interest Rate in the
Rest of the World.
– Americans will want to invest in the country
paying a higher interest rate. To do this they
will need the foreign currency.
• Supply of U.S. Dollars in the currency market
will INCREASE as Americans give up dollars
and increase their DEMAND for the foreign
currency.
Market for Dollars
Exchange
Rate
Supply of Dollars
S$1
Euro Price
Per Dollar
€*
€1
Demand for Dollars
$*
$1
Quantity of Dollars
Market for Euros
Exchange
Rate
Supply of Euros
$1
$*
D€1
Dollar Price
Per Euro
Demand for Euros
€*
€1
Quantity of Euros
What is the effect on the Exchange
Rate?
• The Dollar price per Euro increases (it
becomes more expensive for us to buy)
and the Euro Price per Dollar decreases (it
becomes less expensive for Europeans to
buy dollars)
• The Dollar has DEPRECIATED in value
relative to the foreign currency.
– We can purchase fewer goods from the
Europeans because the dollar buys less of
their currency.
What effect does the exchange rate
between currencies have on Exports
and/or Imports?
• If the price of a dollar is LOWER relative to a
foreign currency then it is said that the Dollar
has DEPRECIATED (gotten weaker) in value.
– The dollar can now purchase less of the foreign currency than it could
before. Foreign goods are now more expensive because our dollars can
purchase less of their goods. On the other hand, foreign currencies have
APPRECIATED in value relative to the dollar so our currency is less
expensive to buy and our goods become relatively cheaper for foreigners
to buy.
IMPORTS WILL DECREASE AND EXPORTS
WILL INCREASE WHEN THE DOLLAR
DEPRECIATES IN VALUE RELATIVE TO
OTHER CURRENCIES
Price of U.S. goods rise relative to German goods.
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
Demand
Q*
Quantity of Euros
Rationale: Americans will demand less expensive Germans goods thereby
increasing the demand for Euros and increasing the supply of dollars to the FO
The U.S. dollars depreciates and the Euro appreciates
Interest rates in the U.S rise faster than interest rates in Canada
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
Rationale:
Demand
Q*
Quantity of Canadian Dollars
French tourist flock to Mexican beaches
Supply
P*
Supply
P*
Demand
Q*
Quantity of Euros
Rationale:
Demand
Q*
Quantity of Pesos
Japanese video games become popular with American children
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
Rationale:
Demand
Q*
Quantity of Yen
Japan’s Real GDP increases
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
What happens to the U.S. Dollar:
What happens to the Japanese Yen:
Demand
Q*
Quantity of Yen
Japan’s Real GDP increases
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
U.S. Exports increase or decrease
U.S. Imports increase or decrease
Demand
Q*
Quantity of Yen
Interest rates in the U.S increase
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
What happens to the U.S. Dollar:
What happens to the Euro:
Demand
Q*
Quantity of Euros
Interest rates in Europe increase
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
U.S. Exports increase or decrease:
U.S. Imports increase or decrease:
Demand
Q*
Quantity of Euros
The price level in Canada increases
Supply
P*
Supply
P*
Demand
Q*
Quantity of Dollars
What happens to the U.S. dollar:
What happens to the Canadian Dollar:
Demand
Q*
Quantity of Canadian Dollars
FOREX – Example
Assumption – Mercedes Benz makes cars in both the U.S. and Germany. Lets say
that yesterday the exchange rate between the $ and the € is $1.00 equals € 1.00. To
buy a Mercedes costs $50,000 or € 50,000. You are indifferent to who sells you the
car. In the paper today you find out the U.S. interest rate relative to the interest rate
in Europe is LOWER. You check the FOREX and you find out that the exchange rate
is now EURO/USD is $1.35. Use the following worksheet to graph what happened in
the FOREX market and answer the questions that follow.
Assumption – Mercedes Benz makes cars in both the U.S. and Germany. Lets say
that yesterday the exchange rate between the $ and the € is $1.00 equals € 1.00. To
buy a Mercedes costs $50,000 or € 50,000. You are indifferent to who sells you the
car. In the paper today you find out the U.S. interest rate relative to the interest rate
in Europe is HIGHER. You check the FOREX and you find out that the exchange rate
is now EURO/USD is $.75. Use the following worksheet to graph what happened in
the FOREX market and answer the questions that follow.
FOREX – Example
Assumption – Mercedes Benz makes cars in both the U.S. and Germany.
Lets say that yesterday the exchange rate between the $ and the € is $1.00
equals € 1.00. To buy a Mercedes costs $50,000 or € 50,000. You are
indifferent to who sells you the car. In the paper today you find out the U.S.
interest rate relative to the interest rate in Europe is LOWER. You check the
FOREX and you find out that the exchange rate is now USD/EURO is $1.35
(dollar price (cost) per euro is $1.35). Use the following worksheet to graph
what happened in the FOREX market and answer the questions that follow.
Market for $
Market for €
Supply$
__price
Of $$*
Supply__
$$price
of__*
€1.00
$1.00
Demand____
Demand$
Q__*
Q$*
•
Quantity of Dollars
Demand/Supply for $$
–
•
Quantity of ____________
Demand/Supply for _____
–
Increase or Decrease
Increase or Decrease
•
•
___Price of $$ -Increase or Decrease
•
•
$$ Price of ______
Increase or Decrease
•
$$ --Depreciate or Appreciate
•
____Depreciate or Appreciate
•
$$ -- Weaker or Stronger
•
____Weaker or Stronger
•
U.S. Imports -----Increase or Decrease
•
___Imports -----Increase or Decrease
•
U.S. Exports------Increase or Decrease
•
____Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE
USD $50,000 = EURO €50,000
Exchange Rate was $1.00 = €1.00
Exchange Rate is now
or
How much does that Mercedes cost now in each currency for an American to buy and a German to buy?
If you are a German and you convert your Euros to Dollars that Mercedes will cost you:
If you are an American and you convert your Dollars to Euros that Mercedes will cost you:
Where do Americans want to buy their Mercedes?
Where do Germans want to buy their Mercedes?
What happens to Exports from U.S
What happens to Imports to U.S.
USD $50,000 = EURO €50,000
Exchange Rate was $1.00 = €1.00
Exchange Rate is now
$1.35 = € 1.00 (dollar price (cost) per euro is $1.35)
or
€.74 = $1.00 (euro price (cost) per dollar is €.74)
How much does that Mercedes cost now in each currency for an American to buy and a German to buy?
If you are a German and you convert your Euros to Dollars that Mercedes will cost you:
$50,000 = No. of Euros needed x $1.35 (for each Euro exchanged he can get $1.35)
$50,000 / $1.35 = No. of Euros needed
€ 37,037
If you are an American and you convert your Dollars to Euros that Mercedes will cost you:
€ 50,000 = No. of Dollars needed x €.74 (for each Dollar exchanged he can get €.74)
€ 50,000 / €.74= No. of Dollars needed
$67,567
Where do Americans want to buy their Mercedes?
In U.S.
Where do Germans want to buy their Mercedes?
In U.S
What happens to Exports from U.S
What happens to Imports to U.S.
FOREX – Example
Assumption – Mercedes Benz makes cars in both the U.S. and Germany.
Lets say that yesterday the exchange rate between the $ and the € is $1.00
equals € 1.00. To buy a Mercedes costs $50,000 or € 50,000. You are
indifferent to who sells you the car. In the paper today you find out the U.S.
interest rate relative to the interest rate in Europe is HIGHER. You check the
FOREX and you find out that the exchange rate is now USD/EURO is $.75
(dollar price (cost) per euro is $.75). Use the following worksheet to graph
what happened in the FOREX market and answer the questions that follow.
Market for $
__price
Of $$
Market for ____
Supply$
Supply__
$$price
of__
____
____
Demand____
Demand$
Circle correct answers
•
Q$*
Quantity of Dollars
Demand/Supply for $$
–
Q__*
Circle correct
answers
•
Quantity of ____________
Demand/Supply for _____
–
Increase or Decrease
Increase or Decrease
•
•
___Price of $$ -Increase or Decrease
•
•
$$ Price of ______
Increase or Decrease
•
$$ --Depreciate or Appreciate
•
____Depreciate or Appreciate
•
$$ -- Weaker or Stronger
•
____Weaker or Stronger
•
U.S. Imports -----Increase or Decrease
•
___Imports -----Increase or Decrease
•
U.S. Exports------Increase or Decrease
•
____Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE
USD $50,000 = EURO €50,000
Exchange Rate was $1.00 = €1.00
Exchange Rate is now
or
How much does that Mercedes cost now in each currency for an American to buy and a German to buy?
If you are a German and you convert your Euros to Dollars that Mercedes will cost you:
If you are an American and you convert your Dollars to Euros that Mercedes will cost you:
Where do Americans want to buy their Mercedes?
Where do Germans want to buy their Mercedes?
What happens to Exports from U.S
What happens to Imports to U.S.
USD $50,000 = EURO €50,000
Exchange Rate was $1.00 = €1.00
Exchange Rate is now
$.75 = € 1.00 (dollar price (cost) per euro is $.75)
or
€.1.33 = $1.00 (euro price (cost) per dollar is €.1.33)
How much does that Mercedes cost now in each currency for an American to buy and a German to buy?
If you are a German and you convert your Euros to Dollars that Mercedes will cost you:
$50,000 = No. of Euros needed x $.75 (for each Euro exchanged he can get $.75
$50,000 / $.75 = No. of Euros needed
€ 66,667
If you are an American and you convert your Dollars to Euros that Mercedes will cost you:
€ 50,000 = No. of Dollars needed x €1.33 (for each Dollar exchanged he can get €1.33)
€ 50,000 / €1.33= No. of Dollars needed
$37,594
Where do Americans want to buy their Mercedes?
In Germany.
Where do Germans want to buy their Mercedes?
In Germany
What happens to Exports from U.S?
What happens to Imports to U.S?
Quantity of_______
Quantity of ____________
•
Demand for $$ -- Increase or Decrease
•
Demand for _____ Increase or Decrease
•
Price of $$ -- Increase or Decrease
•
Price of ________ Increase or Decrease
•
$$ --Depreciate or Appreciate
•
____Depreciate or Appreciate
•
$$ -- Weaker or Stronger
•
____Weaker or Stronger
•
Imports -----Increase or Decrease
•
Imports -----Increase or Decrease
•
Exports------Increase or Decrease
•
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE
Supply$
Supply__
P__*
P$*
Demand____
Demand$
Q__*
Q$*
Quantity of Dollars
Quantity of ____________
•
Demand for $$ -- Increase or Decrease
•
Demand for _____ Increase or Decrease
•
Price of $$ -- Increase or Decrease
•
Price of ________ Increase or Decrease
•
$$ --Depreciate or Appreciate
•
____Depreciate or Appreciate
•
$$ -- Weaker or Stronger
•
____Weaker or Stronger
•
Imports -----Increase or Decrease
•
Imports -----Increase or Decrease
•
Exports------Increase or Decrease
•
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE
MXN price
of $$
Market for $
B
12.5 P
(A)
10 P
Supply$
Market for Pesos_
$$price
of MXN_
A
Supply Peso
Speso1
A
$.10
$.08
B
D$1
Demand Peso_
Demand$
Q$* Q$1
Quantity of Dollars
(ii) In the market for dollars the demand for dollars will increase
because the Mexican govt. wants to buy American made
computers and they will need dollars which they don’t have.
Because of the increase in demand, relative to the supply for the
dollar, the dollar has now appreciated (stronger) in value relative
to the peso. For Mexicans it will now take more pesos for them to
buy a dollar.
Q P* Qp1
Quantity of Pesos
In the market for pesos the supply of
pesos will increase because the
Mexican govt. wants to buy American
made computers and they need to give up pesos in order to
get dollars. Because of the increase in supply, relative to the
demand for the peso, the peso has now depreciated (weaker)
in value relative to the dollar. For Americans it will now take
fewer dollars (cents) for us to buy a peso.
(C) The cost of a trip to Mexico will be less expensive when I exchange my dollars for pesos. Because the
dollar has appreciated in value, I will now receive more pesos for each dollar that I exchange. Therefore I will
need fewer dollars to exchange for pesos than I would have needed before he Mexican government took their
action.
Note: The numbers on the vertical axis were derived this way: I was given
equilibrium price in the example. After I shifted my curves I can see that in
the market for pesos the new price is going to be lower than $.10. I chose
$.08 as the new price. In the market for dollars I know the new price is going to be above 10
peso. I can find what that number is by taking the reciprocal of $.08 which equals 12.5.
___ price
of $$
Market for $
Supply$
Market for _____
$$price
of ___
Supply ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
(ii) In the market for dollars the ______ for dollars will _______
because ________________________________________and
_______________Because of the ________ in __________,
relative to the __________ for the dollar, the dollar has now
___________________ in value relative to the _______. For
_______________ it will now take ____ _____ for them to buy a
dollar.
Quantity of ______
In the market for ______ the ________ for
________ will __________ because
______________________. Because of the _______ in
________, relative to the ________ for the _____ the ______
has now __________________ in value relative to the dollar.
For Americans it will now take ______ ________ for us to buy
a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for
______. Because the dollar has _________ in value, I will now receive _______ ________ for
each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I
would have needed before the scenario stated in the problem.
___ price
of $$
Market for $
Supply$
Market for _____
$$price
of ___
Supply ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
(ii) In the market for dollars the ______ for dollars will _______
because ________________________________________and
_______________Because of the ________ in __________,
relative to the __________ for the dollar, the dollar has now
___________________ in value relative to the _______. For
_______________ it will now take ____ _____ for them to buy a
dollar.
Quantity of ______
In the market for ______ the ________ for
________ will __________ because
______________________. Because of the _______ in
________, relative to the ________ for the _____ the ______
has now __________________ in value relative to the dollar.
For Americans it will now take ______ ________ for us to buy
a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for
______. Because the dollar has _________ in value, I will now receive _______ ________ for
each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I
would have needed before the scenario stated in the problem.
___ price
of $$
Market for $
Supply$
Market for _____
$$price
of ___
Supply ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
(ii) In the market for dollars the ______ for dollars will _______
because ________________________________________and
_______________Because of the ________ in __________,
relative to the __________ for the dollar, the dollar has now
___________________ in value relative to the _______. For
_______________ it will now take ____ _____ for them to buy a
dollar.
Quantity of ______
In the market for ______ the ________ for
________ will __________ because
______________________. Because of the _______ in
________, relative to the ________ for the _____ the ______
has now __________________ in value relative to the dollar.
For Americans it will now take ______ ________ for us to buy
a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for
______. Because the dollar has _________ in value, I will now receive _______ ________ for
each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I
would have needed before the scenario stated in the problem.
___ price
of $$
Market for $
Supply$
Market for _____
$$price
of ___
Supply ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
(ii) In the market for dollars the ______ for dollars will _______
because ________________________________________and
_______________Because of the ________ in __________,
relative to the __________ for the dollar, the dollar has now
___________________ in value relative to the _______. For
_______________ it will now take ____ _____ for them to buy a
dollar.
Quantity of ______
In the market for ______ the ________ for
________ will __________ because
______________________. Because of the _______ in
________, relative to the ________ for the _____ the ______
has now __________________ in value relative to the dollar.
For Americans it will now take ______ ________ for us to buy
a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for
______. Because the dollar has _________ in value, I will now receive _______ ________ for
each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I
would have needed before the scenario stated in the problem.
___ price
of $$
Market for $
Supply$
Market for _____
$$price
of ___
Supply ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
(ii) In the market for dollars the ______ for dollars will _______
because ________________________________________and
_______________Because of the ________ in __________,
relative to the __________ for the dollar, the dollar has now
___________________ in value relative to the _______. For
_______________ it will now take ____ _____ for them to buy a
dollar.
Quantity of ______
In the market for ______ the ________ for
________ will __________ because
______________________. Because of the _______ in
________, relative to the ________ for the _____ the ______
has now __________________ in value relative to the dollar.
For Americans it will now take ______ ________ for us to buy
a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for
______. Because the dollar has _________ in value, I will now receive _______ ________ for
each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I
would have needed before the scenario stated in the problem.
Market for Dollars
Exchange
Rate
Supply of Dollars
Euro Price
Per Dollar
€*
Demand for Dollars
$*
Quantity of Dollars
Market for Dollars
Exchange
Rate
Supply of Dollars
Euro Price
Per Dollar
€*
Demand for Dollars
$*
Quantity of Dollars
Supply$
Supply__
$ price
of__*
__price
Of $*
Demand____
Demand$
Q__*
Q$*
•
Quantity of Dollars
Demand/Supply for $$
•
– - Increase or Decrease
Quantity of ____________
Demand/Supply for _____
–
Increase or Decrease
•
•
___Price of $$ -Increase or Decrease
•
•
$$ Price of ______
Increase or Decrease
•
$$ --Depreciate or Appreciate
•
____Depreciate or Appreciate
•
$$ -- Weaker or Stronger
•
____Weaker or Stronger
•
Imports -----Increase or Decrease
•
Imports -----Increase or Decrease
•
Exports------Increase or Decrease
•
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE
•
Demand/Supply for $$
•
– - Increase or Decrease
Demand/Supply for _____
–
Increase or Decrease
•
•
___Price of $$ -Increase or Decrease
•
•
$$ Price of ______
Increase or Decrease
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$$ --Depreciate or Appreciate
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____Depreciate or Appreciate
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$$ -- Weaker or Stronger
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____Weaker or Stronger
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Imports -----Increase or Decrease
•
Imports -----Increase or Decrease
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Exports------Increase or Decrease
•
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE
Quantity of_______
•
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Quantity of ____________
The Interest Rates in the U.S. are higher relative to the Interest Rates in Europe.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for
Euros. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to
include what happens to the value of both currencies and the reason we had a movement in the exchange rate.
Tell me what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the
back of this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e.
stronger/weaker, appreciate/depreciate, increase/decrease. Etc)
Quantity of_______
•
•
Quantity of ____________
The Interest Rates in the U.S. are lower relative to the Interest Rates in Europe.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for
Euros. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to
include what happens to the value of both currencies and the reason we had a movement in the exchange rate.
Tell me what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the
back of this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e.
stronger/weaker, appreciate/depreciate, increase/decrease. Etc)
Quantity of_______
•
•
Quantity of ____________
French parents hear about a great home-schooling program in Argyle, Tx and they want to come and see
what it is all about. How, in some small way might this effect the FOREX market.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for
Euros. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to
include what happens to the value of both currencies and the reason we had a movement in the exchange rate.
Tell me what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the
back of this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e.
stronger/weaker, appreciate/depreciate, increase/decrease. Etc)
Quantity of_______
•
•
Quantity of ____________
The Japanese discover a method to cure male patterned baldness in Middle-aged men. The cure comes
from an herb grown only in Japan and it is only available in Japan. Mr. Hayward and several million other
American men are VERY interested in this cure. How, in some small way, might this effect the FOREX
market.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for
YEN. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to include
what happens to the value of both currencies and the reason we had a movement in the exchange rate. Tell me
what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the back of
this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e.
stronger/weaker, appreciate/depreciate, increase/decrease. Etc)