Global economic

Ch 9 Foreign Exchange Market
determine the relative rate of currency depend on supply & demand of that currency.

->Exchange Rate
convert currency from one to another
$=medium of exchange
store of value
US dollar is world based currency for trading

Currency Speculation

1) Spot exchange rate "right now deal"
2) Forward exchange "exchange currency for specified rate sometime in future"

PRICE THEORY
"The law of one price"
*assumption
-1 Competitive Markets
-2 No transaction cost
-3 No Barrier to trade

The Identical product sold in diff country must sell for the same price

PPP = Purchasing Power Parity
The price of the basket of goods should be roughly equivalence of each country
P = Price
B = Basket of goods
$ = dollar
d = duby

P_B$/P_Bd = $/d