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Exchange Rates: Shifts in Supply and Demand definitions

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  • Exchange Rate
    Price of one currency in terms of another, reflecting how much foreign currency can be obtained per unit of domestic currency.
  • Equilibrium
    Point where currency supply equals demand, determining the prevailing exchange rate in the market.
  • Appreciation
    Increase in currency value, allowing more foreign currency to be purchased per unit of domestic currency.
  • Depreciation
    Decrease in currency value, resulting in less foreign currency received per unit of domestic currency.
  • Speculation
    Market activity based on expectations of future currency movements, influencing immediate demand or supply.
  • Interest Rate
    Return on investments that attracts or repels foreign capital, affecting currency demand and supply.
  • Foreign Income
    Earnings of overseas buyers, which impact their ability to purchase domestic goods and thus affect currency demand.
  • US Income
    Earnings within the United States, influencing the desire to import foreign goods and supply domestic currency.
  • Import
    Purchase of foreign goods, requiring domestic currency to be exchanged and supplied in the foreign exchange market.
  • Export
    Sale of domestic goods to foreign buyers, increasing demand for domestic currency in the exchange market.
  • Flexible-Exchange-Rate System
    Currency valuation framework where rates adjust freely based on market supply and demand.
  • Aggregate Demand
    Total spending on a nation's goods and services, influenced by currency value changes through trade effects.
  • International Trade Balance
    Difference between a country's exports and imports, affected by shifts in currency value.
  • Determinant
    Underlying factor such as income, interest rates, or expectations that causes shifts in currency supply or demand.
  • Quantity of US Dollars
    Amount of US currency exchanged in the market, shown on the horizontal axis of exchange rate graphs.