AP Macroeconomics Unit 6

Just some useful notes for the AP Macro... WIP

(6.1) Key takeaways for balance of payments accounts

• CA + CFA = 0

• Money in is credit; money out is debit

• Net exports = trade balance = exports minus imports (part of CA)

(6.2) Exchange Rates

(6.3) The Foreign Exchange Market

(6.4) What happens in a paired exchange rate example?

One will appreciate and the other will depreciate since each is relative to each other. See image for example:

(6.5) Effects of currency appreciation and depreciation on the ForEx market?

• An appreciated currency leads to more expensive exports and decrease in aggregate demand

• A depreciated currency leads to a less expensive exports and increase in aggregate demand

(6.6) Memorize…

(6.6) How is the movement of financial capital reflected?

The movement of financial capital is reflected by:

• A changing balance in the CFA

• A shift of the supply of loanable funds