AP Macroeconomics 6.3: The Foreign Exchange Market
Explain how demand and supply for a currency relate to its exchange rate and identify the direction of currency-market changes.
- Syllabus
- Effective Fall 2025
- Course
- AP Macroeconomics
MKT-5.B—a. Define the foreign exchange market, demand for currency, and supply of currency. b. Explain (using graphs as appropriate) the… question 1
[Maximum number: 2]
Exchange rates and interest rates are important for macroeconomic decision making.
Draw a correctly labeled graph of the foreign exchange market for the euro, and show the effect of the change in the real interest rate in Japan from part (a)(i) on each of the following.
Supply of euros. Explain.
(b) 3 points:
•
One point is earned for drawing a correctly labeled graph of the foreign exchange market for the euro.
•
One point is earned for showing that the supply curve for euros shifts to the right and for
concluding that the yen price of the euro decreases.
•
One point is earned for explaining that the European purchases of Japanese financial assets will
increase due to the relatively higher rate of return in Japan.
All question bank results loaded