AP Macroeconomics / Unit 6: Open Economy: International Trade and Finance
6.3 The Foreign Exchange Market
Notes
Demand for a currency comes from foreigners buying that country's goods and assets. Supply comes from residents buying foreign goods and assets.
- Equilibrium sets the exchange rate.
Practice
Japanese tourists visit the US more. Demand for dollars:
They need dollars.
Americans buy more European goods. The demand for euros:
Americans need euros.
In the market for dollars, the price on the vertical axis is:
Price of a dollar.
Ready for more? Take the Unit 6 test.