SlideShare Explore Search You. Show related SlideShares at end. Full Name Comment goes here. Are you sure you want to Yes No. Embeds 0 No embeds. No notes for slide. Ap Macro Forex 1. What is the effect on the Exchange Rate? Foreign goods are now less expensive because our dollars can now purchase more of their goods than before. S because they can get a higher interest rate. To do this they will need U.
Foreign goods are now less expensive because our dollars can purchase more of their goods. Foreign goods are now more expensive because our dollars can purchase less of their goods. To do this they will need the foreign currency.
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. Interest rates in the U. What happens to the Japanese Yen: Exports increase or decrease U. What happens to the Euro: Exports increase or decrease: Imports increase or decrease: What happens to the Canadian Dollar: You are indifferent to who sells you the car. In the paper today you find out the U.
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. 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 What happens to Exports from U. I n Germany What happens to Exports from U. What happens to Imports to U. 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.
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.
The numbers on the vertical axis were derived this way: I was given equilibrium price in the example. In the market for dollars I know the new price is going to be above 10 peso.
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. The cure comes from an herb grown only in Japan and it is only available in Japan.
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