01/10/15
Lesson 2: Floating Exchange Rate Regime
Learning Objective: I can define the concept of a floating exchange rate.
DA: Give a brief summary and analysis of the radio clip addressing the strength of the US $.
Review HW
DA: Give a brief summary and analysis of the radio clip addressing the strength of the US $.
Review HW
Floating exchange rate-Exchange rate regime where the value of a currency is allowed to be determined solely by the demand for, and supply of, the currency on the FXM.
- Dollar has appreciated against the eruo.
- Purchasing power of the dollar has risen, therefore, a given amount of US$ will by more European goods.
- Appreciation of the dollar vs the euro occurs at the same time as the depreciation of the euro vs. the dollar.
HL Practice:
What causes a change in the value of a country's currency in terms of another currency? *Ex. Demand for US$ by people in EU. People in EU will have to buy US$s in the fex market:
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Demand for US$ will rise if:
US $1 = €.90, Each dollar is exchanged for more euros. |
Acitivty:
The US dollar will be supplied on the fex market when American wish to:
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Activity:
HW: Identify a real world example of an appreciation or depreciation of a currency based on the concepts we learned today and present for next class.