Economics 1022A/B Chapter Notes - Chapter 25: Crawling Peg, Capital Account, Loanable Funds

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ECON 1022A/B Full Course Notes
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ECON 1022A/B Full Course Notes
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When people buy things from a different country, they use the currency of that country to make the transaction. Foreign currency is the money of other countries regardless of whether that money is in the form of notes, coins, or bank deposits. An exchange rate is the price at which one currency exchanges for another currency in the foreign exchange market. Appreciation of the dollar is a rise in the exchange rate, and depreciation of the dollar is a fall in the exchange rate. The demand for one money is the supply of another money. People buy canadian dollars to buy canadian exports, or assets, or so they can keep part of their money holding in a canadian bank account. The quantity of canadian dollars demanded depends on many factors, but the main ones (all move the same way as demand except exchange rate) are: (page 599 for summary chart)

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