Foreign Exchange

I.            The buying and selling of currency.

II.            Any transaction that occurs in the Balance of payments necessitates foreign exchange.

            a.            The exchange rate is determine in the foreign currency markets.

            b.            The exchange rate ( e ) is the price of a currency.

III.            Exchange rates are a function of the supply and demand for currency.

            a.            Supply and value are inverse

            b.            Demand and value are direct.

             c.            Appreciation is when the e increases

           d.            Depreciation is when the e decreases.

IV.            Consumer tastes (buying American increases the American dollars value)

V.            Relative income  (evening out or expansions and recessions among nations)

VI.            Relative price level

VII.            Speculation