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📈 Economics
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Currency & Equations
Currency being traded
GBP – Pound Sterling
EUR – Euro
JPY – Japanese Yen
AUD – Australian Dollar
CHF – Swiss Franc
CAD – Canadian Dollar
CNY – Chinese Yuan
Demand for £ (exchange rate =)
P =
Supply of £ (exchange rate =)
P =
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Y-axis = exchange rate (USD per £). Q = quantity of £ traded.
Key Concepts
•
Demand
for a currency comes from foreigners buying exports, tourists, and investors seeking assets denominated in that currency
•
Supply
comes from holders of the currency importing goods or investing abroad — they must sell the currency
• A higher exchange rate makes the currency more expensive → demand falls, supply rises
• Equilibrium sets the
exchange rate
where quantity demanded equals quantity supplied
• Shifts: rising exports → demand shifts right → appreciation; rising imports → supply shifts right → depreciation
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