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Exchange Rates: Shifts in Supply and Demand definitions

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  • Exchange Rate
    Represents the price of one currency in terms of another, determining how much foreign currency can be obtained per unit.
  • Equilibrium
    Occurs where supply and demand for a currency intersect, establishing a stable exchange rate in the market.
  • Appreciation
    Describes a situation where a currency increases in value, allowing more foreign currency to be obtained per unit.
  • Depreciation
    Refers to a currency losing value, resulting in less foreign currency received per unit.
  • Supply Curve
    Graphically shows the relationship between the quantity of a currency offered and its exchange rate.
  • Demand Curve
    Illustrates how much of a currency is desired at various exchange rates by foreign buyers.
  • Foreign Exchange Market
    A marketplace where currencies are traded, and exchange rates are determined by supply and demand.
  • Speculative Outlook
    Reflects expectations about future currency values, influencing current buying or selling decisions.
  • Interest Rate
    Represents the return on investments, affecting demand for a currency as investors seek higher yields.
  • Income
    Indicates the purchasing power of individuals or countries, impacting their ability to buy foreign goods.
  • Import
    Goods or services purchased from abroad, requiring the supply of domestic currency in exchange markets.
  • Export
    Goods or services sold to foreign buyers, increasing demand for domestic currency in exchange markets.
  • Elasticity
    Measures how sensitive supply or demand for a currency is to changes in exchange rates or economic factors.
  • Determinant
    Underlying factor such as income, interest rates, or expectations that causes shifts in supply or demand curves.
  • Quantity
    Amount of currency traded in the market, shown on the horizontal axis of supply and demand graphs.