ECO209Y1 Lecture Notes - Lecture 7: Canadian Dollar, Qus, Demand Curve
Document Summary
Balance of payments records transactions of country with rest of world. Trade in goods in services (imports and exports) Cuab = x - q + nya - ntrf. Current account balance = exports - imports + net income from assets - net transfers to foreigners. Any transaction that involves outflow of foreign currency is payment. Imports, traveling abroad, lending to foreigners, purchase of foreign stock. Transactions that involve inflow of foreign currency is receipt. Overall balance of payment = cuab + caab. If deficit, central bank must sell foreign currency reserves to make excess payments. If surplus, central bank buys foreign currency and builds reserve. Central bank intervenes to finance surpluses and deficits in balance of payments. Exchange rate (e): 1 unit of foreign currency in terms of domestic currency. Supply and demand in market for foreign currency. Demand curve shows quantities demanded at each level of e. Canadians demand us dollars and supply canadian dollars.
