What happens in the foreign exchange market


Question 1: What happens in the foreign exchange market when there is a Canadian export transaction?

Question 2: What happens in the foreign exchange market when there is a Canadian import transaction?

Question 3: Explain how a nation might persistently import more goods than it exports and still maintain equilibrium in its balance of payments.

Question 4: What is the difference between a fixed exchange rate system and a flexible (floating) exchange rate system?

Question 5: Explain how the dollar price of an imported good may change even though the foreign production cost of that product remains unchanged.

Question 6: List and explain the major determinants of the demand for, and supply of, the money of a foreign nation.

Question 7: What is meant by currency appreciation?

Question 8: Describe the three major disadvantages of flexible exchange rates.

Question 9: Explain how the exchange rate gets determined in a flexible exchange rate system.

Question 10: How are flexible exchange rates used to eliminate a balance of payments deficit or surplus?

Question 11: How does a fixed exchange rate system work? How can a nation maintain its fixed exchange rate?

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Macroeconomics: What happens in the foreign exchange market
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