Macroeconomics 111 - Chapter 7

Macroeconomics 111 - Chapter 7 - Chapter 7 An Introduction...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 7 – An Introduction to the Foreign Exchange Market and the Balance of Payments Foreign Exchange : Foreign money, including paper money and bank deposits that are denominated in foreign currency Foreign Exchange Market : A global market in which people trade one currency for another Exchange Rate : The price of one countries currency in terms of another countries currency Exchange Rates - There is one exchange rate for every currency in terms of every other currency – it is barter. - The US price of a foreign good is: US Price = Foreign Currency Price x Exchange Rate Appreciation and Depreciation - A currency is said to appreciate when it buys more of a foreign currency - An appreciation of a nations currency will make foreign good cheaper - This would likely cause an increase in imports and a decline in exports - A currency is said to depreciate when it buys less of a foreign currency - A depreciation will make foreign goods more expensive - This would likely cause a decrease in imports and an increase in exports Balance of Payments – a record countries trade in goods, services and financial assets with the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/07/2008 for the course ECON 111 taught by Professor H during the Spring '07 term at UConn.

Page1 / 3

Macroeconomics 111 - Chapter 7 - Chapter 7 An Introduction...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online