Unit 7: Foreign Exchange Market

Foreign Exchange: the buying and selling of currency

Appreciation: we have a strong dollar

• the dollar buys more of another currency and results in less expensive imports and more expensive exports
• always leads to a trade deficit and imports will increase because they are cheaper 

Depreciation: we have a weak dollar

• the dollar buys less of another currency and results in more expensive imports and less expensive exports
• always leads to a trade surplus and cheap exports