Foreign Currency Exchange show

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Foreign Currency Exchange:

Foreign Currency Exchange By Cooper Larsen

What Drives the Market?:

What Drives the Market? Currency is much like a commodity. Exchange is effected by Supply and Demand. Countries that are export dominant gain currency demand which increases their currency value. Countries that are import dominant invest in other countries currency and lose value.

Appreciation and Deflation :

Appreciation and Deflation Pros Technological advancements=boost to productivity and demand Push back on inflation Cons Less demand (why buy something for two dollars to day that cost one yesterday) Unemployment—slack in demand, rise in real wages Loan Defaults—Mortgages become more strenuous due to raise in real monetary value

Depreciation and Inflation :

Depreciation and Inflation Pros Easier to import (temporary—the question is how long will it take for an equilibrium to come back into effect Expansion in the job market as more money becomes available Cons Short lived advantage, demand will fall and equilibrium will come back Deceiving (e.g. $100,000 salary increase, but is the price of bread consistent or also inflated?)

Reference :

Reference http://www.pbs.org/newshour/businessdesk/2008/01/how-does-china-control-the-exc.html http://www.china.org.cn/english/LivinginChina/204171.htm http://www.onemint.com/2008/11/24/why-is-deflation-bad/

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