4.6 International Economics Exchange Rates

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IB Economics - introduction to exchange rate mechanisms

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  • great slide presentation shame can't save
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  • you can also go to http://www.cursul.eu and see the rate your country currency related to others like eur / usd
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  • Really usefull
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  • cool
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4.6 International Economics Exchange Rates

  1. 1. International Trade 4.6 Exchange Rates ISS International School Mr. Andrew McCarthy
  2. 2. Concepts of Trade Demand of NZD Real Flow Money Flow
  3. 3. Concepts of Trade Demand for NZD increasing Real Flow Money Flow Demand for apples increasing
  4. 4. Concepts of Trade <ul><li>Demand for New Zealand Dollar (NZD) comes from buyers from overseas who want to buy our exports. </li></ul><ul><li>Supply for New Zealand Dollar (NZD) comes from people wishing to sell their holdings of New Zealand money when they get other currencies. </li></ul>
  5. 5. Foreign exchange market Q of NZD Price of NZD in overseas currency Q 1 Appreciation Depreciation D NZ$ S of NZ$
  6. 6. Exporters Appreciation = Bad Depreciation = Good NZ$1 = US$0.80 NZ$1 = US$0.70 NZ$1 = US$0.60 US$2.40 US$2.10 US$1.80 APPRECIATION DEPRECIATION NZ$3.00 NZ$3.00 NZ$3.00 Sell Buy
  7. 7. Importers Appreciation = Good Depreciation = Bad NZ$1 = US$0.80 NZ$1 = US$0.70 NZ$1 = US$0.60 NZ$25.00 NZ$28.50 NZ$33.30 US$20.00 US$20.00 US$20.00 APPRECIATION DEPRECIATION Buy Sell
  8. 8. Foreign exchange market <ul><li>When the exchange rate is high, people overseas have to find more of their own currency to buy NZ $..... </li></ul><ul><ul><li>This disadvantages exporters, as the price of their goods on the overseas market is relatively expensive. </li></ul></ul><ul><ul><li>Importers are advantages as they need to find less NZ$ to buy their imported goods. </li></ul></ul><ul><li>If the exchange rate is low….. </li></ul><ul><ul><li>Exporters are advantaged as price of their goods has fallen on overseas markets to QD increases. </li></ul></ul><ul><ul><li>Importers are disadvantaged as they need to find more money to pay to get their imports. </li></ul></ul>APPRECIATION DEPRECIATION

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