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
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
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 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
What is Absolute Advantage in All Goods? What happens to the possibilities for trade if one country has an absolute advantage in everything? This is typical for high-income countries that often have well-educated workers, technologically advanced equipment, and the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does the Production Possibilities Frontier reflect Comparative Advantage? Absolute advantage simply compares the productivity of a worker between countries. It answers the question, “How many inputs do I need to produce shoes in Mexico?” Comparative advantage asks...
