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Side-by-Side Graphs Foreign Exchange Market

Side-by-Side Graphs Foreign Exchange Market. What shifts the curves in the Foreign Exchange Market “Correctly Labeled for your learning pleasure”. Market for Dollars. Market for Yen. --- Price Per Dollar. S $*. Dollar Price Per Yen. S ¥ *. $/ ¥ 1. S ¥1 *. $/ ¥e. ¥/$ e. D $ 1.

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Side-by-Side Graphs Foreign Exchange Market

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  1. Side-by-Side Graphs Foreign Exchange Market What shifts the curves in the Foreign Exchange Market “Correctly Labeled for your learning pleasure”

  2. Market for Dollars Market for Yen --- Price Per Dollar S$* Dollar Price Per Yen S¥* $/¥1 S¥1* $/¥e ¥/$e D$1 ¥ /$1 D$* D¥* Q-¥e Q¥1 Q$e Q$1 Quantity of Yen Quantity of Dollars Change in Consumer Preferences: US Goods/Services become more desirable because of uniqueness or increased quality. “US Good/Services become MOREdesirable. Japanese consumers will want to buy MORE US Goods/Services. The SUPPLY of Yen will INCREASE in the FOREX and the DEMAND for Dollars will INCREASE in the FOREX… The Dollar will APPRECIATE in value in the FOREX and the Yenwill DEPRECIATE in value in the FOREX” “When the Dollar APPRECIATES in value US Goods and Services become relatively MORE expensive to foreigners and US EXPORTS will DECREASE. When the Dollar Appreciates in value Foreign Goods and services become relatively LESS expensive and IMPORTS to the US will INCREASE”

  3. Market for Dollars Market for Yen --- Price Per Dollar Dollar Price Per Yen S¥* S$* $/¥1 S$1 ¥/$e $/¥e D¥1 ¥/$1 D¥* D$* Q$e Q$1 Q-¥e Q¥1 Quantity of Dollars Quantity of Yen Change in Consumer Preferences: Japanese Goods/Services become more desirable because of uniqueness or increased quality. “Japanese Goods/Services become MOREdesirable. American consumers will want to buy MORE Japanese Goods/Services. The SUPPLY of Dollars will INCREASE in the FOREX and the DEMAND for Yen will INCREASE in the FOREX…The Dollar will DEPPRECIATE in value in the FOREX and the Yenwill APPRECIATE in value in the FOREX” “When the Dollar DEPRECIATES in value US Goods and Services become relatively LESS expensive to foreigners and US EXPORTS will INCREASE. When the Dollar Depreciates in value Foreign Goods and services become relatively MORE expensive and IMPORTS to the US will DECREASE.”

  4. Market for Dollars Market for Yen --- Price Per Dollar S$* Dollar Price Per Yen S¥* $/¥1 S¥1* $/¥e ¥/$e D$1 ¥ /$1 D$* D¥* Q-¥e Q¥1 Q$e Q$1 Quantity of Yen Quantity of Dollars Interest Rates in the US INCREASE relative to the Interest Rates in Japan “US FINANCIAL ASSETS become MORE desirable. Japanese investors/savers will want to invest in the US. The SUPPLY of Yen will INCREASE in the FOREX and the DEMAND for Dollars will INCREASE in the FOREX…The Dollar will APPRECIATE in value in the FOREX and the Yenwill DEPRECIATE in value in the FOREX” When the Dollar APPRECIATES in value US Goods and Services become relatively MORE expensive to foreigners and US EXPORTS will DECREASE. When the Dollar Appreciates in value Foreign Goods and services become relatively LESS expensive and IMPORTS to the US will INCREASE

  5. Market for Dollars Market for Yen --- Price Per Dollar S$* Dollar Price Per Yen S¥* $/¥1 S¥1* $/¥e ¥/$e D$1 ¥ /$1 D$* D¥* Q¥e Q¥1 Q$e Q$1 Quantity of Yen Quantity of Dollars The US goes into a recession and the Japanese economy is in recovery. The Price Level in the US is now LOWER relative to the Price Level in the Japan “Because the general level of prices is LOWER in the US relative to Japan, the Japanese will want to INCREASE Their purchase of US Goods and Services. The Supply of Yen will INCREASE in the FOREX and the Demand for Dollars will INCREASE in the FOREX. .. The Dollar will APPRECIATE in value in the FOREX and the Yen will DEPRECIATE in value in the FOREX” “When the Dollar APPRECIATES in value US Goods and Services become relatively MORE expensive to foreigners and US EXPORTS will DECREASE. When the Dollar Appreciates in value Foreign Goods and services become relatively LESS expensive and IMPORTS to the US will INCREASE”

  6. Market for Dollars Market for Yen --- Price Per Dollar Dollar Price Per Yen S¥* S$* $/¥1 S$1 ¥/$e $/¥e D¥1 ¥/$1 D¥* D$* Q$e Q$1 Q¥e Q¥1 Quantity of Dollars Quantity of Yen Japan goes into a recession and the US economy is in recovery. The Price Level in the US is now HIGHER relative to the Price Level in the Japan “Because the general level of prices is LOWER in Japan relative to the US, Americans will want to INCREASE Their purchases of Japanese Goods and Services. The Supply of Dollars will INCREASE in the FOREX and the Demand for YES will INCREASE in the FOREX. .. The Dollar will DEPPRECIATE in value in the FOREX and the Yen will APPRECIATE in value in the FOREX” “When the Dollar DEPRECIATES in value US Goods and Services become relatively LESS expensive to foreigners and US EXPORTS will INCREASE. When the Dollar Depreciates in value Foreign Goods and services become relatively MORE expensive and IMPORTS to the US will DECREASE.”

  7. Market for Dollars Market for Yen --- Price Per Dollar S$* Dollar Price Per Yen S¥* $/¥1 S¥1* $/¥e ¥/$e D$1 ¥ /$1 D$* D¥* Q¥e Q¥1 Q$e Q$1 Quantity of Yen Quantity of Dollars The Japanese economy is in recovery. GDP, or National Income , in Japan is now HIGHER and the Japanese on average have more disposable income. “Because the Japanese now have more income, they will want to INCREASEtheir purchase of US Goods and Services. The Supply of Yen will INCREASE in the FOREX and the Demand for Dollars will INCREASE in the FOREX. .. The Dollar will APPRECIATE in value in the FOREX and the Yen will DEPRECIATE in value in the FOREX” “When the Dollar APPRECIATES in value US Goods and Services become relatively MORE expensive to foreigners and US EXPORTS will DECREASE. When the Dollar Appreciates in value Foreign Goods and services become relatively LESS expensive and IMPORTS to the US will INCREASE”

  8. Market for Dollars Market for ---- --- Price Per Dollar Dollar Price Per Yen S-* S$* $/-1 S$1 ¥/$e $/-e D$1 ¥/$1 D$* D$* Q$e Q$-1 Q¥e Q¥1 Quantity of Dollars Quantity of Yen The US economy is in recovery. GDP, or National Income , in the US is now HIGHER and Americans on average have more disposable income. “Because Americans now have more income, they will want to INCREASEtheir purchase of Japanese Goods and Services. The Supply of Dollars will INCREASE in the FOREX and the Demand for Yen will INCREASE in the FOREX. .. The Dollar will DEPPRECIATE in value in the FOREX and the Yen will APPRECIATE in value in the FOREX” “When the Dollar DEPRECIATES in value US Goods and Services become relatively LESS expensive to foreigners and US EXPORTS will INCREASE. When the Dollar Depreciates in value Foreign Goods and services become relatively MORE expensive and IMPORTS to the US will DECREASE.”

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