Unit 7 04/15/2015

Foreign exchange market (FOREX)
-The buying and selling of currency
EX in order to purchase souvenirs in France, it is first necessary for Americans to sell (supply) their dollars and buy (demands) Euros.
-The exchange rate (e) is determined in the foreign currency markets
EX 77 Japanese yen to 1 U.S dollar
-Always change the D line on the one currency graph, the S line in the other currency graph
-Moves lines of two currency graphs in the same direction and you will have the correct answer.
-If D on one graph moves up then so will the S on the other graph. And same if D on one graph moves left then S on the other graph will also move left.

Change in exchange rates.
-Exchange rates are a function of the supply and demand for currency.
=increasing of supply in a currency will make it cheaper to buy one unit of that currency.
=decreasing in supply of a currency will make it more expensive to buy one unit of that currency.
=Increase in demand for a currency will make it more expensive to buy one unit of that currency.
=decrease in demand for a currency will make it more cheaper to buy one unit of that currency.

Appreciation
-Appreciation of a currency occurs when the exchange rate of that currency increases
Depreciation
-Depreciation of a currency occurs when the exchange rate of that currency decreases.

Exchange rate determinants
-Consumer taste
-Relative income
-Relative price level