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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.



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  1. Outline the main determinants of:
    1. The demand for dollars
    2. The supply of dollars
  2. Explain the difference between:
    1. A shift and a move of the demand curve for dollars
    2. A shift and a move of the supply curve for dollars
  3. Suggest three factors that would:
    1. Increase the demand for dollars
    2. Decrease the supply of dollars