Unformatted text preview: Euros]
QD$ QD$ QD$ Quantity of Dollars
Quantity Reason for: Upward Sloping “S” Curve [As Euro price increases, QS of dollars increase] D s [D
a rs lo
s Euro Price of $ [Euros looking for $’s] 150
QS$ QS$ QS$ Quantity of Dollars
Quantity D1 APPRECIATION
Or DEPRECIATION Euro Price of $ [Euros looking for $’s] 150
50 Dollar Price of Euro Europeans decide to buy
more American cars.
A D2 E2 M will increase E1
E3 X will increase D # of Dollars A
Europeans decide to buy
fewer American cars.
fewer D1 S [Euros looking for Dollars]
[Dollars looking for Euros] $1.00
$ .50 D s [Dollars looking for Euros] # of Euros A Increase in U.S. Growth Rate (Y)
[We buy more from Japan appreciating
the yen and depreciating the dollar]
The country who initiates the action (buying foreign goods, investing based on higher
interest rates in foreign country, etc.) is the country whose supply of currency moves. Price of $1.50
$1.00 D1 D “We...
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