Demand and supply of dollars (video)Syllabus: Explain that the value of an exchange rate in a floating system is determined by the demand for, and supply of, a currency.
Syllabus: Draw a diagram to show determination of exchange rates in a floating exchange rate system.
Key concepts: Assume Dollar/Reais exchange rate and Dollar market, PoPzYTEP(demand Brazilians) PoPzYTEP(supply Americans)
Derived demand - the demand for Brazilian Reais is determined by the demand for Brazilian Goods and Services, by foreigners
Derived supply - the supply of Brazilian Reais is determined by the demand for foreign Goods and Services, by Brazilians
ESEPME - the demand for Reais is all about ESEPME for foreigners and the supply of Reais is all about ESEPME for Brazilians wanting foreign G and S.
Letīs Do Some Economics
Watch the videos Exchange rate 01: Demand for dollars and Exchange rate 02: Supply of dollars and then answer the questions below. You can watch these in the windows below, or follow the previous link to open the video in a new web window.
- Outline the main determinants of:
- The demand for dollars
- The supply of dollars
- Explain the difference between:
- A shift and a move of the demand curve for dollars
- A shift and a move of the supply curve for dollars
- Suggest three factors that would:
- Increase the demand for dollars
- Decrease the supply of dollars