tailieunhanh - Lecture Macroeconomics - Chapter 18: Exchange rates and the balance of payments

In this chapter you will learn: What determines the supply of and demand for a nation’s currency, about a nation’s balance of payments, what a flexible exchange rates system is and its effects on the domestic economy, what a fixed exchange rates system is and its effects on the domestic economy, about the history of the world’s international exchange-rate systems. | CHAPTER 18 EXCHANGE RATES AND THE BALANCE OF PAYMENTS SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE In this chapter you will learn What determines the supply of and demand for a nation’s currency About a nation’s balance of payments What a flexible exchange rates system is and its effects on the domestic economy What a fixed exchange rates system is and its effects on the domestic economy About the history of the world’s international exchange-rate systems Chapter 18 Topics Financing International Trade The Balance of Payments Flexible Exchange Rates Fixed Exchange Rates International Exchange Rate Systems Financing International Trade Assume $2 = £1 1. $300,000 in Canadian telecommunications equipment purchased by a British buyer for £150,000 2. £150,000 cheque drawn on British bank to pay for equipment 3. £150,000 cheque is exchanged for $300,000 at a Canadian bank 4. Canadian bank sends £150,000 cheque to London bank for future transactions Points to Remember Canadian exports . | CHAPTER 18 EXCHANGE RATES AND THE BALANCE OF PAYMENTS SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE In this chapter you will learn What determines the supply of and demand for a nation’s currency About a nation’s balance of payments What a flexible exchange rates system is and its effects on the domestic economy What a fixed exchange rates system is and its effects on the domestic economy About the history of the world’s international exchange-rate systems Chapter 18 Topics Financing International Trade The Balance of Payments Flexible Exchange Rates Fixed Exchange Rates International Exchange Rate Systems Financing International Trade Assume $2 = £1 1. $300,000 in Canadian telecommunications equipment purchased by a British buyer for £150,000 2. £150,000 cheque drawn on British bank to pay for equipment 3. £150,000 cheque is exchanged for $300,000 at a Canadian bank 4. Canadian bank sends £150,000 cheque to London bank for future transactions Points to Remember Canadian exports create: a foreign demand for Canadian $ an increase in the supply of foreign currency owned by Canadian banks Points to Remember Canadian imports: create a domestic demand for foreign currencies reduce the supplies of foreign currencies held by Canadian banks Points to Remember Canadian exports supply the foreign currencies needed to “pay for” imports Demand for & supplies of foreign currencies also arise from transactions involving services & payment of interest & dividends on foreign investments Chapter 18 Topics Financing International Trade The Balance of Payments Flexible Exchange Rates Fixed Exchange Rates International Exchange Rate Systems The Canadian balance of payments shows the balance between all the payments that Canada receives from foreign countries & all the payments which we make to them The Balance of Payments Current Account shows the flows resulting from imports & exports of goods & services the trade balance is the net amount of imports & exports of goods only the