ECON 102 Chapter Notes - Chapter 34: Exchange Rate, Portfolio Investment, Capital Account

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23 Nov 2017
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ECON 102 Full Course Notes
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Balance of payments: record of transactions between a country & the rest of the world, in canada, it"s made by statistics canada (cid:1828)(cid:1864)(cid:1866)(cid:1857) (cid:1867)(cid:1858) (cid:1868)(cid:1865)(cid:1857)(cid:1866)(cid:1872)(cid:1871)=(cid:1829)(cid:1827)+(cid:1827)=0. Classification of transactions: payment: credit (e. g. export, when canada sells assets to foreigners, there"s a capital inflow, receipt: debit (e. g. import) Foreign-exchange transaction: exchange of one currency for another. Exchange rate: rate at which one currency exchanges for another. Appreciation: money becomes more valuable, takes less cad to purchase units of foreign currency. Foreign-exchange market: product: foreign exchange, price: exchange rate. Supply of foreign exchange: foreigners that buy canadian outputs sells currency in exchange for cad, e. g. services, tourism. Asset sales: capital inflows: foreigners that buy canadian assets, e. g. gov/corporate bonds, shares, real estate. Total supply of foreign exchange: demand of currency is the aggregate demand of individuals, firms & gov. Supply curve for foreign exchange: supply: quantity of foreign currency, positive slope bc high exchange rate means foreigners supply more currency so supply decreases.

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