ECON102 Lecture Notes - Lecture 11: Foreign Exchange Market, Canadian Dollar, Economic Equilibrium

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ECON102 Full Course Notes
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ECON102 Full Course Notes
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The exchange rate and the balance of payments (chapter 25) To get goods and services in another country, we need money of that country. Foreign bank notes, coins, and bank deposits are called foreign currency. We get foreign currency in the foreign exchange market the market in which the currency of one country is exchanged with the currency of another. The price at which one currency exchanges for another is a foreign exchange rate. A fall in value of another currency in terms of another is currency depreciation. The nominal exchange rate is the price of one currency in terms of another. Like all prices, the exchange rate is determined in a market. With many traders and no restrictions, the foreign exchange market is a competitive market. Demand for one money is the supply of another (if we demand usd, we would thus supply.

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