1 Welcome to EC 382: International Economics By: Dr. Jacqueline Khorassani Study Guide Week Ten (Sorry this week I am late.) (

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Presentation transcript:

1 Welcome to EC 382: International Economics By: Dr. Jacqueline Khorassani Study Guide Week Ten (Sorry this week I am late.) (

2 Exchange Rates and Their Determination: A Basic Model CHAPTER 13

3 Why is the exchange rate important? What causes the exchange rate to change? What determines the supply and demand for foreign exchange? What do economists know about the effects of exchange-rate volatility on international markets? General Questions

4 What is an exchange rate? What is appreciation/depreciation of a currency? What is direct/indirect quote? What is the spot exchange rate? How do we calculate the rate of appreciation/depreciation in the spot rate? Specific Questions

5 Foreign exchange market Who are the demanders? –Demand curve What makes the demand curve shift? Who are the suppliers? –Supply curve What makes the supply curve shift? Equilibrium –How can it change?

6 What are the results of the fluctuating foreign exchange rates? –What is the role of forward and future foreign exchange markets?

7 Money, Interest Rates, and the Exchange Rate CHAPTER 14

8 What causes the interest rate to change? What effect does the interest rate have on the exchange rate in the short run? How do changes in capital flows lead to changes in the exchange rate? How do interest rates, the exchange rate, the current account and the capital account all interact? General Questions

9 What is money? What are the function of money? What are the different measures of the supply of money? What is the monetary base? What is the required reserve? What is money multiplier? How can the central bank influence the supply of money? Who demands money and why? Specific Questions

10 Money Market How doe the demand & supply curves look? How can they shift? Where does the equilibrium come from? How can it change?

11 The Interest Rate And the Exchange Rate in the Short Run How are they related to each other? What is the role of spot/forward markets? What is interest parity? What is the role of monetary policy?

12 How do they relate to each other? Interest Rates, the Exchange Rate, and the Balance of Payments