MACRO - Chapter 6.txt

Price at which one currency exchange for another currency

Worldwide market where all countries currencies are both and sold in exchange for each other

fall in exchange rate of one country for another

rise in exchange rate of one currency for another

By demand and supply in foreign exchange markets

If exchange rate rises quantity demanded of Canadian dollars decreases.

DEMAND and SUPPLY

if exchange rate rises, quantity supplied of Canadian dollar increases

difference in interest rates between countries.

difference in inflation rate between countries.

how impacts of exchange rates are transmuted to real GDP and inflation

exchanges rates adjust so that money has equal real purchasing power in any country

rates of return on investments are equal across countries, accounting for expected depreciation/appreciation of exchange rates

Determined by demand and supply in foreign exchange market

Determined by government or central bank

occurs when the quantity demanded and quantity supplied of Canadian dollars is equal.

It is bad as a higher exchange rate for the canadian dollar has advantages or imports being less expensive and cross boarder shopping is better but the disadvantages are there would be fewer exports and lower the real GDP