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Menu_02_May_11 - 1 Foreign exchange market modified supply...

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TODAY’S MENU: Monday 02 May 2011 I. BUSINESS A. Practice Problems 1. Chapter 36: 5, 8, 15 2. Chapter 34: 1, 3-5, 8-10, 12, 13, 15 B. Final exam: One week from Thursday (12 May, 10:00 AM-12:00 PM) in Cox Auditorium II. SUBSTANCE A. Exchange Rates: The basics 1. More definitions a. Appreciation b. Depreciation 2. Relationship between exchange rate and import/export prices a. If a country’s currency appreciates, then… i. Exports become more expensive. ii. Imports become cheaper. b. If a country’s currency depreciates, then… i. Exports become cheaper. ii. Imports become more expensive. B. Nominal exchange rate determination: flexible rates
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Unformatted text preview: 1. Foreign exchange market: modified supply and demand a. Assume: market for euro 2. Modifications a. Q of what? euro traded/exchanged. b. P of what? euro: $ per €. c. S of € by whom? Europeans seeking U.S. $. d. D for € by whom? Americans seeking €. 3. Examples C. Federal budget deficits and the national debt 1. Opening salvo 2. Definitions a. Budget deficit b. National debt c. Structural and passive deficits d. Real and nominal deficits III. NEXT TIME A. Finish Chapter 34: “Deficits and Debt”...
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