New Application of Supply and Demand

Slides:



Advertisements
Similar presentations
Please read this slowly to yourself. THINK about it. Ever been out of the country? Ever bought something from another country? Then you were part of the.
Advertisements

Mechanics of Foreign Exchange (FOREX)
Unit 5 International Trade and Finance
1 Exchange Rates. 2 An exchange rate is the rate at which the currency of one country can be exchanged for the currency of another country. NOTE: it is.
Please read this to yourself. Ever been out of the country? Ever bought something from another country? When you bought goods/services in that foreign.
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.
International Trade and Foreign Exchange Markets
International Trade and Foreign Exchange Markets
International Trade Mechanics of Foreign Exchange (FOREX)
FOREIGN CURRENCY AND FOREIGN EXCHANGE SIMULATION & OVERVIEW International Trade.
 Exchange Rates. Exchange rates  The exchange rate refers to the rate at which national currencies can be exchanged for each other in the foreign exchange.
Exchange Rates Currency Markets. Exchange Rates Exchange rates: is the price of one country’s currency in terms of another country’s currency. Determining.
Exchange Rates.
AKA the “FOREX”. The Foreign Exchange Market Goods produced within a country must be paid for with that country’s currency International transactions.
Exchange Rates  Any transaction that appears in the balance-of- payments accounts involves trading Canadian dollars for another currency  Transactions.
1. What is the role of the foreign exchange market and the exchange rate? 2. What is the importance of real exchange rates and their role in the current.
Exchange Rates and Agricultural Trade Chapter 17.
International Trade. Exports v. Imports Exports – goods sold to other countries Imports - goods bought from other countries.
Exchange Rates What is an exchange rate? What types of rates exist, and how are they different? How would you graph supply and demand for a currency? Why.
Confidential and Proprietary – Not for Distribution The Foreign Currency Market AP Annual Conference 2012 Orlando, Florida 1 Arthur Raymond Chief Reader,
Foreign Exchange Exchange Rate = Relative Price of Currencies.
Foreign Exchange (aka. FOREX) Exchange Rate = Relative Price of Currencies.
Practice 1. U.S. income increase relative to other countries. Does the balance of trade move toward a deficit or a surplus? -U.S. citizens have more disposable.
Foreign Exchange (aka. FOREX) Exchange Rate = Relative Price of Currencies.
Foreign Exchange Rates Flexible Exchange Rates Uses demand and supply to determine the value of one nation’s currency compared to another nation’s Equilibrium.
MECHANICS OF FOREIGN EXCHANGE (FOREX). FOREIGN EXCHANGE (FOREX) The buying and selling of currency Ex. In order to purchase souvenirs in France, it is.
Foreign Exchange (aka. FOREX)
Macroeconomics – Unit 6. An open economy (as opposed to a _________ economy) interacts with the rest of the world through... Goods market Financial markets.
Unit 5-2 Foreign Exchange (aka. FOREX)
International Trade Mechanics of Foreign Exchange (FOREX)
Exchange Rates. Georgia Council on Economic Education w w w. g c e e. o r g.
FOREIGN EXCHANGE (FOREX) STANDARDS: SSEIN3A-D GOALS: 1) I WILL BE ABLE TO DEFINE AND COMPUTE EXCHANGE RATES. 2) I WILL BE ABLE TO LOCATE & INTERPRET FOREX.
Foreign Exchange (aka. FOREX) Exchange Rate = Relative Price of Currencies Copyright ACDC Leadership 2015.
Foreign Exchange (aka. FOREX)
International Trade and Finance: Foreign Exchange Market AP Economics Mr. Bordelon.
Sponge: Wednesday, May 8 1.Money demand refers to a.the total quantity of financial assets that people want to hold. b.how much income people want to earn.
AP Macroeconomics Mechanics of Foreign Exchange (FOREX) &list=PL04578C46EDAB7734.
1 Objective – Students will be able to answer questions regarding foreign exchange. SECTION 1 Chapter 38- Foreign Exchange © 2001 by Prentice Hall, Inc.
Foreign Exchange (aka. FOREX) Exchange Rate = Relative Price of Currencies Copyright ACDC Leadership 2015.
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.
Foreign Exchange (aka. FOREX) Exchange Rate = Relative Price of Currencies.
INTERNATIONAL TRADE Chapter 17 Section 3 Measuring Trade.
Foreign Exchange (aka. FOREX) Exchange Rate = Relative Prices of Currencies Copyright ACDC Leadership 2015.
Trade Surplus Trade Deficit Foreign Exchange Markets.
Unit 5: International Trade 1. International Trade Why do people trade? 2.
AP Macroeconomics Mechanics of Foreign Exchange (FOREX)
Foreign Exchange (aka. FOREX)
Module The Foreign Exchange Market
Foreign Exchange (aka. FOREX)
Foreign Exchange (aka. FOREX)
FOREX: Mechanics of Foreign Exchange
Exchange rates SSEIN1: The student will explain why individuals, businesses, and governments trade goods and services.
Exchange Rates.
International Trade.
Mr. Mayer AP Macroeconomics
Foreign Exchange (aka. FOREX)
Foreign Exchange (aka. FOREX)
Foreign Exchange (aka. FOREX)
Foreign Exchange (aka. FOREX)
Module The Foreign Exchange Market
The Foreign Exchange Market
Foreign Exchange (aka. FOREX)
Exchange Rate = Relative Price of Currencies
Foreign Exchange (aka. FOREX)
Foreign Exchange (aka. FOREX)
International Economics
Mr. Mayer AP Macroeconomics
Mechanics of Foreign Exchange (FOREX)
Mechanics of Foreign Exchange (FOREX)
Foreign Exchange (aka. FOREX) Copyright ACDC Leadership 2018.
Presentation transcript:

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 S€1 Supply of Euros $* $1 Demand for Euros €* €1 Exchange Rate Supply of Euros Dollar Price Per Euro S€1 $* $1 Demand for Euros €* €1 Quantity of Euros

Market for Dollars Supply of Dollars €1 €* D$1 Demand 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 S€1 Supply of Euros $* $1 Demand for Euros €* €1 Exchange Rate Supply of Euros Dollar Price Per Euro S€1 $* $1 Demand for Euros €* €1 Quantity of Euros

Market for Dollars Supply of Dollars €1 €* D$1 Demand 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 S$1 €* $* Demand for Dollars Supply of Dollars €1 Euro Price Per Dollar €* $* Demand for Dollars Supply of Dollars Exchange Rate S$1 €1 $1 Quantity of Dollars

Market for Euros D€1 Supply of Euros $1 $* Demand for Euros €* €1 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 S$1 €* $* Demand for Dollars Supply of Dollars €1 Euro Price Per Dollar €* $* Demand for Dollars Supply of Dollars Exchange Rate S$1 €1 $1 Quantity of Dollars

Market for Euros D€1 Supply of Euros $1 $* Demand for Euros €* €1 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

P* Q* Price of U.S. goods rise relative to German goods. Demand Supply P* Q* Quantity of Dollars 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 FOREX. The U.S. dollars depreciates and the Euro appreciates

Interest rates in the U.S rise faster than interest rates in Canada Demand Supply P* Q* Quantity of Dollars Quantity of Canadian Dollars Rationale:

P* Q* French tourist flock to Mexican beaches Quantity of Pesos Demand Supply P* Q* Quantity of Euros Quantity of Pesos Rationale:

P* Q* Japanese video games become popular with American children Demand Supply P* Q* Quantity of Dollars Quantity of Yen Rationale:

P* Q* Japan’s Real GDP increases Quantity of Yen Quantity of Dollars Demand Supply P* Q* Quantity of Dollars Quantity of Yen What happens to the U.S. Dollar: What happens to the Japanese Yen:

P* Q* Japan’s Real GDP increases Quantity of Yen Quantity of Dollars Demand Supply P* Q* Quantity of Dollars Quantity of Yen U.S. Exports increase or decrease U.S. Imports increase or decrease

P* Q* Interest rates in the U.S increase Quantity of Euros Demand Supply P* Q* Quantity of Dollars Quantity of Euros What happens to the U.S. Dollar: What happens to the Euro:

P* Q* Interest rates in Europe increase Quantity of Euros Demand Supply P* Q* Quantity of Dollars Quantity of Euros U.S. Exports increase or decrease: U.S. Imports increase or decrease:

P* Q* The price level in Canada increases Quantity of Canadian Dollars Demand Supply P* Q* Quantity of Dollars Quantity of Canadian Dollars What happens to the U.S. dollar: What happens to the Canadian Dollar:

FOREX – Example Assumption – Mercedes Benz makes cars in both the 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 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 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.

Q$* Q__* Market for $ Market for € Quantity of Dollars Supply$ Supply__ __price Of $$* $$price of__* €1.00 $1.00 Demand____ Demand$ Q$* Q__* Quantity of Dollars Quantity of ____________ Demand/Supply for $$ Increase or Decrease ___Price of $$ -- $$ --Depreciate or Appreciate $$ -- Weaker or Stronger U.S. Imports -----Increase or Decrease U.S. Exports------Increase or Decrease Demand/Supply for _____ Increase or Decrease $$ Price of ______ ____Depreciate or Appreciate ____Weaker or Stronger ___Imports -----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 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 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 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.

Q$* Q__* Market for $ Market for ____ Quantity of Dollars Supply$ Supply__ __price Of $$ $$price of__ ____ ____ Demand____ Demand$ Q$* Q__* Circle correct answers Circle correct answers Quantity of Dollars Quantity of ____________ Demand/Supply for $$ Increase or Decrease ___Price of $$ -- $$ --Depreciate or Appreciate $$ -- Weaker or Stronger U.S. Imports -----Increase or Decrease U.S. Exports------Increase or Decrease Demand/Supply for _____ Increase or Decrease $$ Price of ______ ____Depreciate or Appreciate ____Weaker or Stronger ___Imports -----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 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 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?

U.S. NET EXPORTS -----INCREASE OR DECREASE Quantity of_______ Quantity of ____________ Demand for $$ -- Increase or Decrease Price of $$ -- Increase or Decrease $$ --Depreciate or Appreciate $$ -- Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease Demand for _____ Increase or Decrease Price of ________ Increase or Decrease ____Depreciate or Appreciate ____Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease U.S. NET 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 $$ -- Increase or Decrease Price of $$ -- Increase or Decrease $$ --Depreciate or Appreciate $$ -- Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease Demand for _____ Increase or Decrease Price of ________ Increase or Decrease ____Depreciate or Appreciate ____Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease U.S. NET EXPORTS -----INCREASE OR DECREASE

Q$* Q P* Market for $ Market for Pesos_ B A A (A) B Q$1 Qp1 MXN price of $$ Supply$ Supply Peso_ $$price of MXN_ B Speso1 12.5 P A A (A) $.10 10 P B $.08 D$1 Demand Peso_ Demand$ Q$* Q$1 Q P* Qp1 Quantity of Dollars Quantity of Pesos (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. 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.

Market for $ Market for _____ (A) Quantity of Dollars ___ price of $$ Supply$ Supply ___ $$price of ___ (A) D$1 Demand ____ Demand$ Quantity of Dollars Quantity of ______ (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. 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 $ Market for _____ (A) Quantity of Dollars ___ price of $$ Supply$ Supply ___ $$price of ___ (A) D$1 Demand ____ Demand$ Quantity of Dollars Quantity of ______ (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. 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 $ Market for _____ (A) Quantity of Dollars ___ price of $$ Supply$ Supply ___ $$price of ___ (A) D$1 Demand ____ Demand$ Quantity of Dollars Quantity of ______ (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. 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 $ Market for _____ (A) Quantity of Dollars ___ price of $$ Supply$ Supply ___ $$price of ___ (A) D$1 Demand ____ Demand$ Quantity of Dollars Quantity of ______ (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. 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 $ Market for _____ (A) Quantity of Dollars ___ price of $$ Supply$ Supply ___ $$price of ___ (A) D$1 Demand ____ Demand$ Quantity of Dollars Quantity of ______ (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. 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 Euros Supply of Euros $* Demand for Euros €* Exchange Rate Supply of Euros Dollar Price Per Euro $* Demand for Euros €* Quantity of Euros

Market for Dollars Supply of Dollars €* Demand for Dollars $* Exchange Rate Supply of Dollars Euro Price Per Dollar €* Demand for Dollars $* Quantity of Dollars

Market for Dollars Supply of Dollars €* Demand for Dollars $* Exchange Rate Supply of Dollars Euro Price Per Dollar €* Demand for Dollars $* Quantity of Dollars

Market for Euros Supply of Euros $* Demand for Euros €* Exchange Rate Supply of Euros Dollar Price Per Euro $* Demand for Euros €* Quantity of Euros

Q$* Q__* Quantity of Dollars Quantity of ____________ Supply$ Supply__ $ price of__* __price Of $* Demand____ Demand$ Q$* Q__* Quantity of Dollars Quantity of ____________ Demand/Supply for $$ - Increase or Decrease ___Price of $$ -- Increase or Decrease $$ --Depreciate or Appreciate $$ -- Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease Demand/Supply for _____ Increase or Decrease $$ Price of ______ ____Depreciate or Appreciate ____Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease U.S. NET EXPORTS -----INCREASE OR DECREASE

$$ --Depreciate or Appreciate $$ -- Weaker or Stronger Demand/Supply for $$ - Increase or Decrease ___Price of $$ -- Increase or Decrease $$ --Depreciate or Appreciate $$ -- Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease Demand/Supply for _____ Increase or Decrease $$ Price of ______ ____Depreciate or Appreciate ____Weaker or Stronger Imports -----Increase or Decrease Exports------Increase or Decrease U.S. NET EXPORTS -----INCREASE OR DECREASE

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 ____________ 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 ____________ 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 ____________ 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)