Join the Dojo for Unlimited Access
The foreign exchange market determines exchange rates through supply and demand. Currency appreciation occurs when demand increases or supply decreases. Currency depreciation occurs when demand decreases or supply increases. Factors include interest rates, economic conditions, and capital flows.
Ultimate Flashcard Review
Practice Questions: Test Your Understanding
Apply what you've learned with these practice questions. These questions test your understanding of the key concepts.
Question 1 of 3
Assume the market for the British Pound (£) is in equilibrium. If consumer tastes in the United States shift strongly in favor of British goods and services, what will happen in the foreign exchange market for pounds?
The demand for pounds will decrease, causing the pound to depreciate.
The supply of pounds will increase, causing the pound to depreciate.
The demand for pounds will increase, causing the pound to appreciate.
The supply of pounds will decrease, causing the pound to appreciate.
Both demand and supply of pounds will decrease.
Key Takeaways
- 📊Master the fundamentals: Understanding these core concepts is essential for success in AP Economics.
- ✅Practice makes perfect: Use the interactive exercises and practice questions to reinforce your understanding.