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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 Questions

Practise drawing currency demand and supply, identifying which currency a cross-border transaction requires, and linking goods or asset purchases to foreign-exchange flows.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • draw a currency market with exchange rate on the vertical axis and quantity on the horizontal axis
  • show downward-sloping currency demand and upward-sloping currency supply with correct labels
  • identify demand for a currency from foreign purchases of the country's goods, services, or assets
  • identify currency supply from domestic purchases of foreign goods, services, or financial assets

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 Questions 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.

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