Podcast
Questions and Answers
What is the effect of an appreciation of a nation’s currency on the prices of foreign goods?
What is the effect of an appreciation of a nation’s currency on the prices of foreign goods?
In a flexible exchange rate system, what determines the exchange rate?
In a flexible exchange rate system, what determines the exchange rate?
What brings the quantity demanded and quantity supplied into balance in the foreign exchange market?
What brings the quantity demanded and quantity supplied into balance in the foreign exchange market?
What does the horizontal axis indicate in a graph measuring the dollar price of a foreign currency?
What does the horizontal axis indicate in a graph measuring the dollar price of a foreign currency?
Signup and view all the answers
What is the impact of a depreciation of a nation’s currency on the prices of foreign goods?
What is the impact of a depreciation of a nation’s currency on the prices of foreign goods?
Signup and view all the answers
An appreciation of a nation’s currency will make foreign goods cheaper
An appreciation of a nation’s currency will make foreign goods cheaper
Signup and view all the answers
In a flexible exchange rate system, the exchange rate is determined by demand only
In a flexible exchange rate system, the exchange rate is determined by demand only
Signup and view all the answers
The supply of foreign exchange originates from purchases of goods, services, and assets by Americans from foreigners
The supply of foreign exchange originates from purchases of goods, services, and assets by Americans from foreigners
Signup and view all the answers
The foreign exchange market brings the quantity demanded and quantity supplied into imbalance
The foreign exchange market brings the quantity demanded and quantity supplied into imbalance
Signup and view all the answers
The dollar price of the English pound is measured on the vertical axis in a graph of the foreign exchange market equilibrium
The dollar price of the English pound is measured on the vertical axis in a graph of the foreign exchange market equilibrium
Signup and view all the answers
Study Notes
Impact of Currency Appreciation and Depreciation
- An appreciation of a nation's currency makes foreign goods cheaper.
- A depreciation of a nation's currency makes foreign goods more expensive.
Determinants of Exchange Rate
- In a flexible exchange rate system, the exchange rate is determined by the forces of demand and supply.
Foreign Exchange Market
- The supply of foreign exchange originates from purchases of goods, services, and assets by Americans from foreigners.
- The quantity demanded and quantity supplied are brought into balance in the foreign exchange market.
Graphing the Foreign Exchange Market
- The horizontal axis in a graph of the foreign exchange market equilibrium measures the quantity of foreign currency.
- The vertical axis in a graph of the foreign exchange market equilibrium measures the price of foreign currency in terms of the domestic currency.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Learn about the foreign exchange market and how different currencies are traded. Understand how exchange rates affect the prices of foreign goods and the impact of currency appreciation and depreciation.
