The Dollar

Dollar Appreciation:

• Each dollar gets you more of the other currency.

• This means is that US exports gets more expensive for foreigners.

• US imports gets cheaper for us

• Results: Exports decrease while imports increased

• $ is leaving the US

   -Xn and GDP decrease

   - Demand for the dollar increases

   - Supply of the dollar decreases

Dollar Depreciation:

• Each dollar gets you less of the other currency.

• Less of the foreign currency is needed.

• Exports are going to increase and imports are going to decrease.

• Money is entering the US

   - Net Exports increases

   - GDP increases

• Demand for the dollar decreases

• Supply of the dollar increase

- If it comes to supply of the dollar, we're making transferred payments to foreigners

- If it comes from supply of the dollar, foreigners are making transfer payments to us.

- Supply of the dollar: comes from US Citizens, banks and industries, wanting to purchase our goods, investments and assets.