ECON 1012 Lecture Notes - Lecture 24: Aggregate Demand, Dont, Buy More
Document Summary
The exchange rate and the balance of payments. Explain how the exchange rate is determined. Explain interest rate parity and purchasing power parity. Describe the alternative exchange rate policies and explain their effects. Describe the balance of payments accounts and explain what causes an international deficit. Mainly how ppp might affect exchange rates. However, most of the material related to trade and the ad is in chapter 10 (pages 248-249). You should understand the law of one price and ppp, but the bulk of chapter 9 (demand and supply of currencies) won"t be tested directly. Your class notes on ppp and exchange rates should suffice. Whenever people buy things from another country, they use the currency of that country to make the transaction. It doesn"t make any difference what the item is that is being traded intentionally. Foreign money is just like u. s. money.
