1. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. CHAPTER 13 Exchange Rates: Why Do They Change?

2. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-1 The Real Exchange Rate

3. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-2 Real Exchange Rate Is an Index Number

4. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-3 Real versus Nominal Exchange Rates

5. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-4 Percentage Change in the Real Exchange Rate

6. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-5 Percentage Changes: Nominal Exchange Rates, Inflation Rates, and Real Exchange Rates

7. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-6 Review of Exchange Rate Measures

8. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-7 Nominal Effective and Real Effective Exchange Rates for the U.S. Dollar Relative to a Broad Index of Major U.S. Trading Partners Source: Federal Reserve Board, Foreign Exchange Rates, http://www.federalreserve.gov/releases/h10/ Summary (accessed September 25, 2006).

9. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-8 Nominal Effective and Real Effective Exchange Rates for the U.S. Dollar Relative to an Index of Major Foreign Currencies Source: Federal Reserve Board. Foreign Exchange Rates, http://www.federalreserve.gov/releases/h10/ Summary (accessed September 25, 2006).

10. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-9 Supply and Demand: What Goes on the Horizontal Axis?

11. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-10 Putting Supply and Demand into a Familiar Context

12. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-11 Swiss Franc Market and Dollar Market for Foreign Exchange

13. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-12 Major Groups That Demand Swiss Francs

14. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-13 Major Groups That Supply Swiss Francs

15. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-14 Equilibrium Exchange Rate and Quantity per Period

16. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-15 Demand for Swiss Francs is a Mirror Image of the Dollar Supply

17. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-16 Supply of Swiss Francs is a Mirror Image of the Dollar Demand

18. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-17 Major Factors That Affect Nominal Exchange Rates

19. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-18 Effects of an Increase in Mexico’s Relative Price Level

20. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-19 Effects of an Increase in Mexico’s Relative Real GDP

21. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-20 Effects of Falling Mexican Interest Rates Relative to the United States

22. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-21 Effects of an Increase in Mexico’s Relative Risks or Taxes, or Effects of Relatively Unfavorable Mexican Investment Return Expectations

23. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-22 Spot Market Speculation Effects of an Expected Appreciation of the Peso

24. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-23 Forward Market Speculation Effects of an Expected Increase in the Peso’s Value

25. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-24 Effects of Bank of Mexico Intervention to Raise the Peso’s Value

26. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-25 The Effects of Bank of Mexico Foreign Exchange Market Intervention to Raise the Value of the Peso

27. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-26 Summary of Effects of Central Bank Intervention

28. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-27 Alternative Exchange Rate Systems

29. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-28 Stabilizing Central Bank Intervention

30. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-29 De Facto Exchange Rate Regimes* Source: International Monetary Fund, Classification of Exchange Rate Arrangements and Monetary Policy Frameworks, De Facto Exchange Rate Arrangements and Anchors of Monetary Policy as of December 31, 2005, http://www.imf.org/external/np/mfd/er/2005/eng/1205.htm#table (accessed September 26, 2006).

31. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Economic Information for Switzerland, 2001–2005

32. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit A13-1 Downward-Sloping Supply of Swiss Francs