Appreciation:

• Each dollar gets you more of the other currency

• More of the foreign currency is needed to buy each dollar

• US exports get more expensive for foreigners
• US imports get cheaper for us

• Exports decrease, imports increase, GDP decrease

• Demand for the U.S. dollar will increase

• Supply for the U.S. dollar decrease

Depreciation:

• Each dollar gets you less of the other currency

• Exports increase, imports decrease, GDP increase

• US exports get cheaper for foreigners to buy

• US imports get more expensive for US

• Demand of US dollar decrease

• Supply of US dollar increase

• Sources of Supply and Demand

Supply of US dollar comes from:

1. US citizens
2. -Banks
3. -Industries wanting to make foreign purchases
4. -Investments
5. -Assets
6. -By making transfer payments to foreigners

Demand of the U.S. dollar comes from:

1. Foreigners
2. Banks
3. Industries wanting to purchase our goods
4. Investments
5. Assets
6. Make transfer payments to us