fx - 1 Foreign Exchange and Currencies Economics 71a Spring...

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Unformatted text preview: 1 Foreign Exchange and Currencies Economics 71a Spring 2007 Mayo, Chapter 6 (skim) Lecture notes 2.6 International Money Flows Funds fow between countries Two basic reasons Trade fows Investment (capital) fows Central banks also intervene in these markets The Demand and Supply o Foreign Currency Example: U.S. ($) and France (euros) U.S. consumer buys French wine + demand or euros U.S. rm sells ipod to French consumer +supply or euros U.S. investor buys French stock +demand or euros U.S. rm sells stock to French investor +supply or euros Supply and Demand or Euros P = $/euro Q = euros D S 2 The Demand and Supply of Foreign Currency Example: U.S. ($) and France (euros) U.S. consumer buys French wine + demand for euros ($/euro rises) U.S. rm sells ipod to French consumer +supply for euros ($/euro falls) U.S. investor buys French stock +demand for euros ($/euro rises) U.S. rm sells stock to French investorU....
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This note was uploaded on 01/02/2012 for the course FINANCE 347 taught by Professor Bayou during the Fall '11 term at NYU.

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fx - 1 Foreign Exchange and Currencies Economics 71a Spring...

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