Foreign Exchange rates

1. Foreign Exchange rates • SSEIN3- Explain how changes in exchange rates can have an effect of purchasing power

2. Exchange Rate • The exchange rate measure how much currency in one country is worth to another nation • The foreign exchange market is where currencies are bought and sold

3. Types of Exchange rates

4. Types of Exchange rates • Fixed: value of the currency if fixed or tied to another countries currency • ****Floating: determined by supply and demand

5. Purchasing Power • The actual amount of goods and services that can be bought with any given amount of money.

6. Currency Appreciation • Purchasing Power or Value of a dollar becomes greater compared to other countries • Helps – Domestic consumers buying foreign products Foreign producers (importers) • Hurts- Domestic producers (exporters) Foreign Consumers

7. Currency Depreciation • In comparison to other countries, a countries currency becomes less valuable and has less purchasing power. • Helps- Domestics Producers (exporters) Foreign Consumers • Hurts- Foreign Producers (importers) Domestic consumers buying foreign products

8. Factors that effect Currency • Supply and Demand!!!!!! • Interest rate on investments • Productivity • Demand for Currency in other nations

9. Balance of Trade • It is the difference between the monetary value of exports and imports in the country • Exports - Imports= Balance of Trade Unfavorable Balance Favorable balance

10. Balance of Payments • Balance of Payments: the difference between money a country pays for exports receives for imports

11. Balance of Payments • Trade Deficit: occurs when a country pays more for imports than it makes on exports • Trade Surplus: occurs when a country earn more on exports than it pays for imports