04/23/2014 Supply and Demand of Money

• Supply of the dollar
• Comes from U.S. citizens, banks, and industries wanting to purchase foreign goods, investments, assets, and make transfer payments to foreigners.
• Demand of the dollar
• Comes from foreigners, banks, and industries wanting to purchase our goods, investments, assets, and to make transfer payments to us.
• In short, if dollar appreciates, then demand of the dollar increases, supply decreases value of dollar increases.
• If dollar depreciate, then demand decreases, supply increases value of dollar decreases.
• Fixed Exchange Rate
• based on a countries willingness to distribute currency and control the amounts. (Set by the government)
• Flexible or floating Exchange Rate
• Supply and demand of that currency v. other currencies.
• No government interventions, based on market forces.