1. New Application of Supply and Demand
The Foreign Exchange Market
FOREX

2. Supply and Demand and Exchange Rates
If Americans want to buy foreign goods/services then they need the currency that the people in the foreign country use from day to day.
If Foreigners want to buy American made goods/services, then they need the currency that people in the U.S. use from day to day.
This currency exchange MUST be made somewhere along the process of trade!!
Currency (money) is a commodity just like any other good/service – its value is determined by the forces of supply and demand – we can’t escape it!!

3. There are two major reasons for exchanging currencies
A desire to buy the goods/services of a foreign supplier.
Change in Tastes
Change in Quality
Change in relative price levels
Change in relative wealth (GDP)
A relative change in Interest Rates that investors can earn.

4. Change in Tastes effect on the Exchange Rate
Suppose Foreigners want the latest computer produced by Dell Computers.
To do this they will need U.S. dollars because Dell computer wants dollars, not Euros, Pesos, Yen, Yuan, etc.
Foreigners will have to exchange their currency for dollars. The Supply of the Foreign Currency in the currency market will INCREASE as Foreigners give up their currency and increase their DEMAND for U.S. Dollars.

5. Market for Euros S€1 Supply of Euros $* $1 Demand for Euros €* €1
Exchange
Rate
Supply of Euros
Dollar Price
Per Euro
S€1 $* $1
Demand for Euros €* €1
Quantity of Euros

6. Market for Dollars Supply of Dollars €1 €* D$1 Demand for Dollars $*
Exchange
Rate
Supply of Dollars €1 €*
Euro Price
Per Dollar
D$1
Demand for Dollars $* $1
Quantity of Dollars

7. What is the effect on the Exchange Rate?
The Dollar price per Euro decreases (it becomes cheaper for us to buy) and the Euro Price per Dollar increases (it becomes more expensive for Europeans to buy dollars)
The Dollar has APPRECIATED in value relative to the foreign currency.
We can purchase more goods from the Europeans because the dollar buys more of their currency.

8. What effect does the exchange rate between currencies have on Exports and/or Imports?
If the price of a dollar RISES relative to a foreign currency then it is said that the Dollar has APPRECIATED (gotten stronger) in value.
The dollar can now purchase more of the foreign currency than it could before. Foreign goods are now less expensive because our dollars can now purchase more of their goods than before. On the other hand, foreign currencies have DEPRECIATED in value relative to the dollar so our currency is more expensive to buy and our goods become relatively more expensive for foreigners to buy.
IMPORTS WILL INCREASE AND EXPORTS WILL DECREASE WHEN THE DOLLAR APPRECIATES IN VALUE RELATIVE TO OTHER CURRENCIES

9. Interest Rate effect on the Exchange Rate
Suppose the Interest Rate in U.S. is HIGHER relative to the Interest Rate in the Rest of the World.
Foreigners will want to invest in the U.S because they can get a higher interest rate. To do this they will need U.S. dollars.
Supply of the Foreign Currency in the currency market will INCREASE as Foreigners give up their currency and increase their DEMAND for U.S. Dollars.

10. Market for Euros S€1 Supply of Euros $* $1 Demand for Euros €* €1
Exchange
Rate
Supply of Euros
Dollar Price
Per Euro
S€1 $* $1
Demand for Euros €* €1
Quantity of Euros

11. Market for Dollars Supply of Dollars €1 €* D$1 Demand for Dollars $*
Exchange
Rate
Supply of Dollars €1 €*
Euro Price
Per Dollar
D$1
Demand for Dollars $* $1
Quantity of Dollars

12. What is the effect on the Exchange Rate?
The Dollar price per Euro decreases (it becomes cheaper for us to buy) and the Euro Price per Dollar increases (it becomes more expensive for Europeans to buy dollars)
The Dollar has APPRECIATED in value relative to the foreign currency.
We can purchase more goods from the Europeans because the dollar buys more of their currency.

13. What effect does the exchange rate between currencies have on Exports and/or Imports?
If the price of a dollar RISES relative to a foreign currency then it is said that the Dollar has APPRECIATED (gotten stronger) in value.
The dollar can now purchase more of the foreign currency than it could before. Foreign goods are now less expensive because our dollars can purchase more of their goods. On the other hand, foreign currencies have DEPRECIATED in value relative to the dollar so our currency is more expensive to buy and our goods become relatively more expensive for foreigners to buy.
IMPORTS WILL INCREASE AND EXPORTS WILL DECREASE WHEN THE DOLLAR APPRECIATES IN VALUE RELATIVE TO OTHER CURRENCIES

14. Change in Tastes effect on the Exchange Rate
Suppose Americans develop a taste for a vintage wine produced and sold in France.
To do this they will need Euros because the French wine producers want Euros, not Dollars.
Americans will have to exchange their currency for Euros. The Supply of the Dollars in the currency market will INCREASE as Americans give up their currency and increase their DEMAND for Euros.

15. Market for Dollars S$1 €* $* Demand for Dollars Supply of Dollars €1
Euro Price
Per Dollar €* $*
Demand for Dollars
Supply of Dollars
Exchange
Rate
S$1 €1 $1
Quantity of Dollars

16. Market for Euros D€1 Supply of Euros $1 $* Demand for Euros €* €1
Exchange
Rate
Supply of Euros $1 $*
D€1
Dollar Price
Per Euro
Demand for Euros €* €1
Quantity of Euros

17. What is the effect on the Exchange Rate?
The Dollar price per Euro increases (it becomes more expensive for us to buy) and the Euro Price per Dollar decreases (it becomes less expensive for Europeans to buy dollars)
The Dollar has DEPRECIATED in value relative to the foreign currency.
We can purchase fewer goods from the Europeans because the dollar buys less of their currency.

18. What effect does the exchange rate between currencies have on Exports and/or Imports?
If the price of a dollar is LOWER relative to a foreign currency then it is said that the Dollar has DEPRECIATED (gotten weaker) in value.
The dollar can now purchase less of the foreign currency than it could before. Foreign goods are now more expensive because our dollars can purchase less of their goods. On the other hand, foreign currencies have APPRECIATED in value relative to the dollar so our currency is less expensive to buy and our goods become relatively cheaper for foreigners to buy.
IMPORTS WILL DECREASE AND EXPORTS WILL INCREASE WHEN THE DOLLAR DEPRECIATES IN VALUE RELATIVE TO OTHER CURRENCIES

19. Interest Rate effect on the Exchange Rate
Suppose the Interest Rate in U.S. is LOWER relative to the Interest Rate in the Rest of the World.
Americans will want to invest in the country paying a higher interest rate. To do this they will need the foreign currency.
Supply of U.S. Dollars in the currency market will INCREASE as Americans give up dollars and increase their DEMAND for the foreign currency.

20. Market for Dollars S$1 €* $* Demand for Dollars Supply of Dollars €1
Euro Price
Per Dollar €* $*
Demand for Dollars
Supply of Dollars
Exchange
Rate
S$1 €1 $1
Quantity of Dollars

21. Market for Euros D€1 Supply of Euros $1 $* Demand for Euros €* €1
Exchange
Rate
Supply of Euros $1 $*
D€1
Dollar Price
Per Euro
Demand for Euros €* €1
Quantity of Euros

22. What is the effect on the Exchange Rate?
The Dollar price per Euro increases (it becomes more expensive for us to buy) and the Euro Price per Dollar decreases (it becomes less expensive for Europeans to buy dollars)
The Dollar has DEPRECIATED in value relative to the foreign currency.
We can purchase fewer goods from the Europeans because the dollar buys less of their currency.

23. What effect does the exchange rate between currencies have on Exports and/or Imports?
If the price of a dollar is LOWER relative to a foreign currency then it is said that the Dollar has DEPRECIATED (gotten weaker) in value.
The dollar can now purchase less of the foreign currency than it could before. Foreign goods are now more expensive because our dollars can purchase less of their goods. On the other hand, foreign currencies have APPRECIATED in value relative to the dollar so our currency is less expensive to buy and our goods become relatively cheaper for foreigners to buy.
IMPORTS WILL DECREASE AND EXPORTS WILL INCREASE WHEN THE DOLLAR DEPRECIATES IN VALUE RELATIVE TO OTHER CURRENCIES

25. P* Q* Price of U.S. goods rise relative to German goods.
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Euros
Rationale: Americans will demand less expensive Germans goods thereby
increasing the demand for Euros and increasing the supply of dollars to the FOREX.
The U.S. dollars depreciates and the Euro appreciates

26. Interest rates in the U.S rise faster than interest rates in Canada
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Canadian Dollars
Rationale:

28. P* Q* French tourist flock to Mexican beaches Quantity of Pesos
Demand
Supply P* Q*
Quantity of Euros
Quantity of Pesos
Rationale:

29. P* Q* Japanese video games become popular with American children
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Yen
Rationale:

32. P* Q* Japan’s Real GDP increases Quantity of Yen Quantity of Dollars
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Yen
What happens to the U.S. Dollar:
What happens to the Japanese Yen:

33. P* Q* Japan’s Real GDP increases Quantity of Yen Quantity of Dollars
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Yen
U.S. Exports increase or decrease
U.S. Imports increase or decrease

35. P* Q* Interest rates in the U.S increase Quantity of Euros
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Euros
What happens to the U.S. Dollar:
What happens to the Euro:

36. P* Q* Interest rates in Europe increase Quantity of Euros
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Euros
U.S. Exports increase or decrease:
U.S. Imports increase or decrease:

38. P* Q* The price level in Canada increases Quantity of Canadian Dollars
Demand
Supply P* Q*
Quantity of Dollars
Quantity of Canadian Dollars
What happens to the U.S. dollar:
What happens to the Canadian Dollar:

39. FOREX – Example Assumption – Mercedes Benz makes cars in both the U. S
FOREX – Example Assumption – Mercedes Benz makes cars in both the U.S. and Germany. Lets say that yesterday the exchange rate between the $ and the € is $1.00 equals € To buy a Mercedes costs $50,000 or € 50,000. You are indifferent to who sells you the car. In the paper today you find out the U.S. interest rate relative to the interest rate in Europe is LOWER. You check the FOREX and you find out that the exchange rate is now EURO/USD is $ Use the following worksheet to graph what happened in the FOREX market and answer the questions that follow. Assumption – Mercedes Benz makes cars in both the U.S. and Germany. Lets say that yesterday the exchange rate between the $ and the € is $1.00 equals € To buy a Mercedes costs $50,000 or € 50,000. You are indifferent to who sells you the car. In the paper today you find out the U.S. interest rate relative to the interest rate in Europe is HIGHER. You check the FOREX and you find out that the exchange rate is now EURO/USD is $.75. Use the following worksheet to graph what happened in the FOREX market and answer the questions that follow.

40. FOREX – Example Assumption – Mercedes Benz makes cars in both the U. S
FOREX – Example Assumption – Mercedes Benz makes cars in both the U.S. and Germany. Lets say that yesterday the exchange rate between the $ and the € is $1.00 equals € To buy a Mercedes costs $50,000 or € 50,000. You are indifferent to who sells you the car. In the paper today you find out the U.S. interest rate relative to the interest rate in Europe is LOWER. You check the FOREX and you find out that the exchange rate is now USD/EURO is $1.35 (dollar price (cost) per euro is $1.35). Use the following worksheet to graph what happened in the FOREX market and answer the questions that follow.

41. Q$* Q__* Market for $ Market for € Quantity of Dollars
Supply$
Supply__
__price
Of $$*
$$price
of__*
€1.00
$1.00
Demand____
Demand$
Q$*
Q__*
Quantity of Dollars
Quantity of ____________
Demand/Supply for $$
Increase or Decrease
___Price of $$ --
$$ --Depreciate or Appreciate
$$ -- Weaker or Stronger
U.S. Imports -----Increase or Decrease
U.S. Exports------Increase or Decrease
Demand/Supply for _____
Increase or Decrease
$$ Price of ______
____Depreciate or Appreciate
____Weaker or Stronger
___Imports -----Increase or Decrease
____Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE

42. USD $50,000 = EURO €50,000 Exchange Rate was $1. 00 = €1
USD $50,000 = EURO €50,000 Exchange Rate was $1.00 = €1.00 Exchange Rate is now or How much does that Mercedes cost now in each currency for an American to buy and a German to buy? If you are a German and you convert your Euros to Dollars that Mercedes will cost you: If you are an American and you convert your Dollars to Euros that Mercedes will cost you: Where do Americans want to buy their Mercedes? Where do Germans want to buy their Mercedes? What happens to Exports from U.S What happens to Imports to U.S.

43. USD $50,000 = EURO €50,000 Exchange Rate was $1. 00 = €1
USD $50,000 = EURO €50,000 Exchange Rate was $1.00 = €1.00 Exchange Rate is now $1.35 = € 1.00 (dollar price (cost) per euro is $1.35) or €.74 = $1.00 (euro price (cost) per dollar is €.74) How much does that Mercedes cost now in each currency for an American to buy and a German to buy? If you are a German and you convert your Euros to Dollars that Mercedes will cost you: $50,000 = No. of Euros needed x $1.35 (for each Euro exchanged he can get $1.35) $50,000 / $1.35 = No. of Euros needed € 37,037 If you are an American and you convert your Dollars to Euros that Mercedes will cost you: € 50,000 = No. of Dollars needed x €.74 (for each Dollar exchanged he can get €.74) € 50,000 / €.74= No. of Dollars needed $67,567 Where do Americans want to buy their Mercedes? In U.S. Where do Germans want to buy their Mercedes? In U.S What happens to Exports from U.S What happens to Imports to U.S.

44. FOREX – Example Assumption – Mercedes Benz makes cars in both the U. S
FOREX – Example Assumption – Mercedes Benz makes cars in both the U.S. and Germany. Lets say that yesterday the exchange rate between the $ and the € is $1.00 equals € To buy a Mercedes costs $50,000 or € 50,000. You are indifferent to who sells you the car. In the paper today you find out the U.S. interest rate relative to the interest rate in Europe is HIGHER. You check the FOREX and you find out that the exchange rate is now USD/EURO is $.75 (dollar price (cost) per euro is $.75). Use the following worksheet to graph what happened in the FOREX market and answer the questions that follow.

45. Q$* Q__* Market for $ Market for ____ Quantity of Dollars
Supply$
Supply__
__price
Of $$
$$price
of__
____
____
Demand____
Demand$
Q$*
Q__*
Circle correct answers
Circle correct answers
Quantity of Dollars
Quantity of ____________
Demand/Supply for $$
Increase or Decrease
___Price of $$ --
$$ --Depreciate or Appreciate
$$ -- Weaker or Stronger
U.S. Imports -----Increase or Decrease
U.S. Exports------Increase or Decrease
Demand/Supply for _____
Increase or Decrease
$$ Price of ______
____Depreciate or Appreciate
____Weaker or Stronger
___Imports -----Increase or Decrease
____Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE

46. USD $50,000 = EURO €50,000 Exchange Rate was $1. 00 = €1
USD $50,000 = EURO €50,000 Exchange Rate was $1.00 = €1.00 Exchange Rate is now or How much does that Mercedes cost now in each currency for an American to buy and a German to buy? If you are a German and you convert your Euros to Dollars that Mercedes will cost you: If you are an American and you convert your Dollars to Euros that Mercedes will cost you: Where do Americans want to buy their Mercedes? Where do Germans want to buy their Mercedes? What happens to Exports from U.S What happens to Imports to U.S.

47. USD $50,000 = EURO €50,000 Exchange Rate was $1. 00 = €1
USD $50,000 = EURO €50,000 Exchange Rate was $1.00 = €1.00 Exchange Rate is now $.75 = € 1.00 (dollar price (cost) per euro is $.75) or €.1.33 = $1.00 (euro price (cost) per dollar is €.1.33) How much does that Mercedes cost now in each currency for an American to buy and a German to buy? If you are a German and you convert your Euros to Dollars that Mercedes will cost you: $50,000 = No. of Euros needed x $.75 (for each Euro exchanged he can get $.75 $50,000 / $.75 = No. of Euros needed € 66,667 If you are an American and you convert your Dollars to Euros that Mercedes will cost you: € 50,000 = No. of Dollars needed x €1.33 (for each Dollar exchanged he can get €1.33) € 50,000 / €1.33= No. of Dollars needed $37,594 Where do Americans want to buy their Mercedes? In Germany. Where do Germans want to buy their Mercedes? In Germany What happens to Exports from U.S? What happens to Imports to U.S?

48. U.S. NET EXPORTS -----INCREASE OR DECREASE
Quantity of_______
Quantity of ____________
Demand for $$ -- Increase or Decrease
Price of $$ -- Increase or Decrease
$$ --Depreciate or Appreciate
$$ -- Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
Demand for _____ Increase or Decrease
Price of ________ Increase or Decrease
____Depreciate or Appreciate
____Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE

49. U.S. NET EXPORTS -----INCREASE OR DECREASE
Supply$
Supply__
P$*
P__*
Demand____
Demand$
Q$*
Q__*
Quantity of Dollars
Quantity of ____________
Demand for $$ -- Increase or Decrease
Price of $$ -- Increase or Decrease
$$ --Depreciate or Appreciate
$$ -- Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
Demand for _____ Increase or Decrease
Price of ________ Increase or Decrease
____Depreciate or Appreciate
____Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE

51. Q$* Q P* Market for $ Market for Pesos_ B A A (A) B Q$1 Qp1
MXN price
of $$
Supply$
Supply Peso_
$$price
of MXN_ B
Speso1
12.5 P A A
(A)
$.10
10 P B
$.08
D$1
Demand Peso_
Demand$
Q$*
Q$1
Q P*
Qp1
Quantity of Dollars
Quantity of Pesos
(ii) In the market for dollars the demand for dollars will increase because the Mexican govt. wants to buy American made computers and they will need dollars which they don’t have. Because of the increase in demand, relative to the supply for the dollar, the dollar has now appreciated (stronger) in value relative to the peso. For Mexicans it will now take more pesos for them to buy a dollar.
In the market for pesos the supply of
pesos will increase because the
Mexican govt. wants to buy American
made computers and they need to give up pesos in order to get dollars. Because of the increase in supply, relative to the demand for the peso, the peso has now depreciated (weaker) in value relative to the dollar. For Americans it will now take fewer dollars (cents) for us to buy a peso.
(C) The cost of a trip to Mexico will be less expensive when I exchange my dollars for pesos. Because the
dollar has appreciated in value, I will now receive more pesos for each dollar that I exchange. Therefore I will
need fewer dollars to exchange for pesos than I would have needed before he Mexican government took their
action.
Note: The numbers on the vertical axis were derived this way: I was given
equilibrium price in the example. After I shifted my curves I can see that in
the market for pesos the new price is going to be lower than $.10. I chose
$.08 as the new price. In the market for dollars I know the new price is going to be above 10 peso. I can find what that number is by taking the reciprocal of $.08 which equals 12.5.

52. Market for $ Market for _____ (A) Quantity of Dollars
___ price
of $$
Supply$
Supply ___
$$price
of ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
Quantity of ______
(ii) In the market for dollars the ______ for dollars will _______ because ________________________________________and _______________Because of the ________ in __________, relative to the __________ for the dollar, the dollar has now ___________________ in value relative to the _______. For _______________ it will now take ____ _____ for them to buy a dollar.
In the market for ______ the ________ for
________ will __________ because ______________________. Because of the _______ in ________, relative to the ________ for the _____ the ______ has now __________________ in value relative to the dollar. For Americans it will now take ______ ________ for us to buy a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for ______. Because the dollar has _________ in value, I will now receive _______ ________ for each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I would have needed before the scenario stated in the problem.

54. Market for $ Market for _____ (A) Quantity of Dollars
___ price
of $$
Supply$
Supply ___
$$price
of ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
Quantity of ______
(ii) In the market for dollars the ______ for dollars will _______ because ________________________________________and _______________Because of the ________ in __________, relative to the __________ for the dollar, the dollar has now ___________________ in value relative to the _______. For _______________ it will now take ____ _____ for them to buy a dollar.
In the market for ______ the ________ for
________ will __________ because ______________________. Because of the _______ in ________, relative to the ________ for the _____ the ______ has now __________________ in value relative to the dollar. For Americans it will now take ______ ________ for us to buy a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for ______. Because the dollar has _________ in value, I will now receive _______ ________ for each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I would have needed before the scenario stated in the problem.

55. Market for $ Market for _____ (A) Quantity of Dollars
___ price
of $$
Supply$
Supply ___
$$price
of ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
Quantity of ______
(ii) In the market for dollars the ______ for dollars will _______ because ________________________________________and _______________Because of the ________ in __________, relative to the __________ for the dollar, the dollar has now ___________________ in value relative to the _______. For _______________ it will now take ____ _____ for them to buy a dollar.
In the market for ______ the ________ for
________ will __________ because ______________________. Because of the _______ in ________, relative to the ________ for the _____ the ______ has now __________________ in value relative to the dollar. For Americans it will now take ______ ________ for us to buy a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for ______. Because the dollar has _________ in value, I will now receive _______ ________ for each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I would have needed before the scenario stated in the problem.

57. Market for $ Market for _____ (A) Quantity of Dollars
___ price
of $$
Supply$
Supply ___
$$price
of ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
Quantity of ______
(ii) In the market for dollars the ______ for dollars will _______ because ________________________________________and _______________Because of the ________ in __________, relative to the __________ for the dollar, the dollar has now ___________________ in value relative to the _______. For _______________ it will now take ____ _____ for them to buy a dollar.
In the market for ______ the ________ for
________ will __________ because ______________________. Because of the _______ in ________, relative to the ________ for the _____ the ______ has now __________________ in value relative to the dollar. For Americans it will now take ______ ________ for us to buy a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for ______. Because the dollar has _________ in value, I will now receive _______ ________ for each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I would have needed before the scenario stated in the problem.

58. Market for $ Market for _____ (A) Quantity of Dollars
___ price
of $$
Supply$
Supply ___
$$price
of ___
(A)
D$1
Demand ____
Demand$
Quantity of Dollars
Quantity of ______
(ii) In the market for dollars the ______ for dollars will _______ because ________________________________________and _______________Because of the ________ in __________, relative to the __________ for the dollar, the dollar has now ___________________ in value relative to the _______. For _______________ it will now take ____ _____ for them to buy a dollar.
In the market for ______ the ________ for
________ will __________ because ______________________. Because of the _______ in ________, relative to the ________ for the _____ the ______ has now __________________ in value relative to the dollar. For Americans it will now take ______ ________ for us to buy a _______.
(C) The cost of a trip to __________ will be _______expensive when I exchange my dollars for ______. Because the dollar has _________ in value, I will now receive _______ ________ for each dollar that I exchange. Therefore I will need _______ dollars to exchange for ______ than I would have needed before the scenario stated in the problem.

59. Market for Euros Supply of Euros $* Demand for Euros €*
Exchange
Rate
Supply of Euros
Dollar Price
Per Euro $*
Demand for Euros €*
Quantity of Euros

60. Market for Dollars Supply of Dollars €* Demand for Dollars $*
Exchange
Rate
Supply of Dollars
Euro Price
Per Dollar €*
Demand for Dollars $*
Quantity of Dollars

61. Market for Dollars Supply of Dollars €* Demand for Dollars $*
Exchange
Rate
Supply of Dollars
Euro Price
Per Dollar €*
Demand for Dollars $*
Quantity of Dollars

62. Market for Euros Supply of Euros $* Demand for Euros €*
Exchange
Rate
Supply of Euros
Dollar Price
Per Euro $*
Demand for Euros €*
Quantity of Euros

63. Q$* Q__* Quantity of Dollars Quantity of ____________
Supply$
Supply__
$ price
of__*
__price
Of $*
Demand____
Demand$
Q$*
Q__*
Quantity of Dollars
Quantity of ____________
Demand/Supply for $$
- Increase or Decrease
___Price of $$ --
Increase or Decrease
$$ --Depreciate or Appreciate
$$ -- Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
Demand/Supply for _____
Increase or Decrease
$$ Price of ______
____Depreciate or Appreciate
____Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE

64. $$ --Depreciate or Appreciate $$ -- Weaker or Stronger
Demand/Supply for $$
- Increase or Decrease
___Price of $$ --
Increase or Decrease
$$ --Depreciate or Appreciate
$$ -- Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
Demand/Supply for _____
Increase or Decrease
$$ Price of ______
____Depreciate or Appreciate
____Weaker or Stronger
Imports -----Increase or Decrease
Exports------Increase or Decrease
U.S. NET EXPORTS -----INCREASE OR DECREASE

65. Quantity of ____________
The Interest Rates in the U.S. are higher relative to the Interest Rates in Europe.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for Euros. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to include what happens to the value of both currencies and the reason we had a movement in the exchange rate. Tell me what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the back of this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e. stronger/weaker, appreciate/depreciate, increase/decrease. Etc)

66. Quantity of ____________
The Interest Rates in the U.S. are lower relative to the Interest Rates in Europe.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for Euros. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to include what happens to the value of both currencies and the reason we had a movement in the exchange rate. Tell me what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the back of this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e. stronger/weaker, appreciate/depreciate, increase/decrease. Etc)

67. Quantity of ____________
French parents hear about a great home-schooling program in Argyle, Tx and they want to come and see what it is all about. How, in some small way might this effect the FOREX market.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for Euros. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to include what happens to the value of both currencies and the reason we had a movement in the exchange rate. Tell me what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the back of this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e. stronger/weaker, appreciate/depreciate, increase/decrease. Etc)

68. Quantity of ____________
The Japanese discover a method to cure male patterned baldness in Middle-aged men. The cure comes from an herb grown only in Japan and it is only available in Japan. Mr. Hayward and several million other American men are VERY interested in this cure. How, in some small way, might this effect the FOREX market.
On the above graphs show me how this will effect supply and demand in the Market for Dollars and the Market for YEN. Don’t forget to properly label!! In the space below, tell me “the story” of what is going on. Be sure to include what happens to the value of both currencies and the reason we had a movement in the exchange rate. Tell me what the potential effect on Imports and Exports will be after the change in the exchange rate. Use the back of this page if you need more space. Be as complete as possible. Use all the terms we have studied (i.e. stronger/weaker, appreciate/depreciate, increase/decrease. Etc)