Any transaction that occurs in the balance of payments necessitates foreign exchange
Exchange rate is determined in the foreign exchange
Exchange rate is the price of currency
Exchange rate are a function of the supply and demand for currency
- increase in supply, decrease exchange rate
- increase in demand, increase exchange
- Appreciation of currency occurs when the exchange rate of that currency increase
- Depreciation of a currency occurs when the exchange rate of that currency decreases
- Consumers tastes
- Relative income
- Relative price level
- Speculation