Dollar Appreciation and Depreciation

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:
• US citizens
• Banks
• Industries wanting to make foreign purchases
• Investments
• Assets
• By making transfer payments to foreigners

• Demand of the U.S. dollar comes from:
• Foreigners
• Banks
• Industries wanting to purchase our goods
• Investments
• Assets
• Make transfer payments to us