AP®︎ Macroeconomics: Topic 6.3 Flashcards

Master key terms and definitions for Topic 6.3 of AP Macroeconomics – The Foreign Exchange Market to help you prep for quizzes and the AP exam.

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Term

Foreign Exchange Market

Definition

The market where one country's currency is exchanged for another country's currency.

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Foreign Exchange Market
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The market where one country's currency is exchanged for another country's currency.

MKT-5.B
Equilibrium Exchange Rate
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The exchange rate at which the quantity of a currency demanded equals the quantity supplied.

MKT-5.CMKT-5.C.1
Exchange Rate Adjustment To Disequilibrium
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Shortages raise the exchange rate and surpluses lower it until equilibrium is restored.

MKT-5.DMKT-5.D.1
Flexible Exchange Rate System
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A system where currency values are determined by market demand and supply.

MKT-5.C
Determinants Of Currency Demand
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Tastes, foreign income, domestic prices, expected appreciation, and domestic interest rates can shift demand.

MKT-5.B
Demand And Supply Of Currency
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The amounts of a currency buyers want and sellers offer at different exchange rates.

MKT-5.B
Sources Of Currency Demand And Supply
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Demand comes from foreigners buying domestic goods and assets; supply comes from domestic purchases abroad.

MKT-5.B
Currency Demand And Supply Curves
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Demand slopes downward and supply slopes upward as exchange rates change quantity demanded and supplied.

MKT-5.B
Currency Shortage And Surplus In The Foreign Exchange Market
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A shortage means quantity demanded exceeds supplied; a surplus means quantity supplied exceeds demanded.

MKT-5.DMKT-5.D.1
Currency Appreciation And Depreciation
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An increase or decrease in a currency’s value relative to another currency.

MKT-5.D
Exchange Rate
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The price of one currency in terms of another currency.

MKT-5.C