STARTER: Recap… Macro effects of a currency depreciation This will have an effect on a number of key economic indicators Domestic productionTrade deficitDomestic.

Slides:

Advertisements

Similar presentations

A2 Business Studies – External Influences

Advertisements

Interest Rates in the Classical Model Nominal vs.. Real Interest Rates Real interest rate =Nominal rate - Inflation rate  = r- 

Session 8 Exchange Rates Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of.

Chapter 17: Macroeconomics in an Open Economy © 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e. 1 of 32.

1 International Economic Activity. 2 Basic look at interaction with the rest of the world. When we talk about interactions with the rest of the world.

Foreign Exchange and Currencies Economics 71a Spring 2007 Mayo, Chapter 6 (skim) Lecture notes 2.6.

Foreign Exchange Markets and Exchange Rates. Foreign Exchange Markets A network of systems and mechanisms through which currencies are traded Market actors:

Exchange Rates and the Open Economy Chapter 18. Foreign Exchange Market Abbreviation: FOREX Over a trillion dollars worth are traded daily. Most trading.

EXCHANGE RATES.

Chapter 36: International Finance McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. 13e.

Foreign Exchange FNCE 4070 – Financial Markets and Institutions.

Exchange Rates. Foreign Exchange Market Currencies are bought and sold on a foreign exchange market. The demand for a currency is a function of three.

Determinants of Trade AG BM 102. Introduction Trade - an integral part of food system Major market for our products – corn, cotton, soybeans, chicken.

 We have several different exchange rates, one for each currency.  It measures how much we would get in terms of the other currency per $1 NZ.

The Foreign Exchange Market

Introduction to Economics: Social Issues and Economic Thinking Wendy A. Stock PowerPoint Prepared by Z. Pan CHAPTER 13 FOREIGN EXCHANGE AND THE INTERNATIONAL.

International Economics Floating Exchange Rates and Internal Balance

Foreign Exchange (FOREX) The buying and selling of currency – Ex. In order to purchase souvenirs in France, it is first necessary for Americans to sell.

1 of 49 module: 43 >> Krugman/Wells ©2009  Worth Publishers Exchange Rates and Macroeconomic Policy.

Balance of Payments, Exchange Rates & Trade Deficits

IGCSE®/O Level Economics

International Economics Trade, The Balance of Payments and Exchange Rates.

Macroeconomics Lecture 16. Review of the Previous Lecture Three Experiments –Fiscal Policy at Home –Fiscal Policy Abroad –Increase in Investment Demand.

Session 23 Internal and External Balance with Fixed Exchange Rates.

‘Strong’ vs. ‘Weak’ Currency Exchange Rates: The price at which currency can be bought and sold.

EXCHANGE RATE DETERMINATION. Meaning of Exchange Rate and Measuring Changes in Exchange Rates Value of one currency in units of another currency A decline.

Exchange Rates. Definition The price of one country’s currency in relation to that of another.

EXCHANGE RATES MK 26. EXCHANGE RATE The price at which one currency can be exchanged for another. e.g. $1= EUR 0.84 (stronger)

What are exchange rates? An exchange rate is the price of one countries currency in relation to that of another. e.g. £1 = $1.6

Economic factors to consider  Inflation  Changes in the Interest rate (Monetary Policy)  Unemployment  Exchange Rate  Taxation (Fiscal Policy)

1. Assume that the U.S. economy is in a severe

What are imports/ exports? What do we import/ export here in the UK?

Graphing Currency Movements

Small open economy version

THE GLOBAL ECONOMY. FINANCING INTERNATIONAL TRADE Markets exist everywhere there is supply & demand There are markets where dollars can be exchanged for.

Interest and Exchange Rates. Interest Rates The Bank of England changes the interest rate in order to control the rate of ____________. The Bank of England.

Macro Chapter 9 An Introduction to Basic Macroeconomic Markets.

36-1 International Finance  Each country has its own currency (except in Europe, where many countries have adopted the euro).  International trade therefore.

External Stability Lesson Three The Exchange Rate.

19 The World of International Finance. HOW EXCHANGE RATES ARE DETERMINED What Are Exchange Rates? exchange rate The price at which currencies trade for.

Exchange Rate Policy Exchange Rates  The value of currencies are determined by the foreign currency markets.  With no government intervention – free.

Exchange Rate Equilibrium Demand for a currency  Quantity demanded increases as price of currency decreases Supply of a currency for sale  Quantity supplied.

STARTER: Recap… Macro effects of a currency depreciation This will have an effect on a number of key economic indicators Domestic productionTrade deficitDomestic.

AS Economics PowerPoint Briefings 2007 tutor2u ™ tutor2u ™ Exchange Rates.

Starter: Recap… Macro effects of a currency depreciation

Starter: Recap… Macro effects of a currency depreciation

10.1Exchange Rates What is meant by exchange rate

What can you determine about exchange rates from the graph?

Exchange Rates The rate at which one currency can be exchanged for another e.g. £1 = $1.90 £1 = €1.50 Important in trade.

Starter: Recap… Macro effects of a currency depreciation

Output and the Exchange Rate in the Short Run

Factors affecting exports and imports

BALANCE OF PAYMENT & EXCHANGE RATE

Exchange Rates.

10.1Exchange Rates What is meant by exchange rate

Starter: Recap… Macro effects of a currency depreciation

Financing and Trade Deficits

Bell Activity How do you think your life would be different without foreign-made goods?

Starter: Recap… Macro effects of a currency depreciation

AP Macroeconomics 2004 Question 2.

Graphing Currency Movements

International Economics

International Economics Floating Exchange Rates and Internal Balance

Measuring the Value of Trade

Warm Up What do exchange rates tell us?.

Chapter 26 Government Objectives

The Foreign Exchange Market

International Economics

The Price Adjustment Mechanism with Flexible and Fixed Exchange Rates

Presentation transcript:

STARTER: Recap… Macro effects of a currency depreciation This will have an effect on a number of key economic indicators Domestic productionTrade deficitDomestic employment Changes in import and export prices will affect demand Import volumes will CONTRACT Export volumes will EXPAND When the pound depreciates against the US dollar It makes UK import prices RISE It makes UK export prices FALL

Why is foreign currency bought and sold?

Why might their be shifts in the demand and supply curves for currency?

A rise in UK exports A rise in UK imports A rise in interest rates An inflow of investment funds A belief that the pound is going to fall in value

Pick 3 countries – what has been the pattern of their exchange rates over the last 10 years – why do you think this was?

TASK…

June 13

Different types of exchange rates

‘A system whereby the price of one currency expressed in terms of another’

An exchange rate system in which the value of the currency has a fixed value against other countries. The fixed rate is often set by the government.