Wednesday, April 1, 2015

Forex, Growth, BOP, Cheat Sheet

Forex Cheat Sheet - Growth - BOP

So, this is a start on a cheat sheet for the FOREX section of the AP exam.

RIR = Real Interest Rate (Loanable Funds)
PL = Price Level (think, Inflation/Deflation)
MS = Money Supply
SLF  = Supply of Loanable Funds
DLF  = Demand for Loanable Funds
GS = Government Spending
$ = US Dollar

The Multiple choice section of the Macro AP exam has covered all of the below. You must also understand the other side of these interactions. If the demand for the $ decreases then the demand for the Peso/Euro must have increased, relatively. Do not memorize these interactions, write them out with words to make sure the causal effects are understood.

Ex. US imports are increasing - US citizens are buying more Chinese goods - to buy Chinese goods the Americans are exchanging dollars for yuan - the supply of dollars is increasing in the foreign exchange market - if supply increases then the value of the dollar will fall, relative to the yuan's value.  

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