by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Relative Inflation Shifts Demand and Supply for a Currency? If a country experiences a relatively high inflation rate compared with other economies, then the buying power of its currency is eroding, which will tend to discourage anyone from wanting to acquire...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do changes in the expected rate of return shift demand and supply for a currency?The motivation for investment, whether domestic or foreign, is to earn a return. If rates of return in a country look relatively high, then that country will tend to attract funds...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Expectations about Future Exchange Rates Shift Demand?One reason to demand a currency on the foreign exchange market is the belief that the currency’s value is about to increase. One reason to supply a currency—that is, sell it on the foreign exchange...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Dealers in the Interbank Market? Most people and firms who are exchanging a substantial quantity of currency go to a bank, and most banks provide foreign exchange as a service to customers. These banks (and a few other firms), known as dealers, then trade...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Who Demands and Supplies Currency in a Foreign Exchange Market? In foreign exchange markets, demand and supply become closely interrelated, because a person or firm who demands one currency must at the same time supply another currency—and vice versa. To get a sense...
