The economics of money, banking, and financial markets

CHAPTER 16 APPENDIX 1

Monetary Targeting

Go to MyLab Economics, 

www.pearson.com/mylab/economics

CHAPTER 16 APPENDIX 2

A Brief History of Federal Reserve Policymaking 

Go to MyLab Economics, 

www.pearson.com/mylab/economics

A01_MISH3821_12_SE_FM.indd   23

27/10/17   5:49 PM

---

xxiv

 

Contents in Detail

PART 5

 

International Finance and Monetary Policy  403

CHAPTER 17

The Foreign Exchange Market

 

404

Foreign Exchange Market .........................................................................................................404

Following the Financial News  Foreign Exchange Rates  405

What Are Foreign Exchange Rates? ..................................................................................... 405

Why Are Exchange Rates Important? .................................................................................. 405

How Is Foreign Exchange Traded? ...................................................................................... 406

Exchange Rates in the Long Run .............................................................................................407

Theory of Purchasing Power Parity ..................................................................................... 407

APPLICATION

  Burgernomics: Big Macs and PPP .....................................................409

Factors That Affect Exchange Rates in the Long Run ........................................................... 411

Exchange Rates in the Short Run: A Supply and Demand Analysis ..............................413

Supply Curve for Domestic Assets ...................................................................................... 413

Demand Curve for Domestic Assets .................................................................................... 413

Equilibrium in the Foreign Exchange Market ..................................................................... 415

Explaining Changes in Exchange Rates .................................................................................415

Shifts in the Demand for Domestic Assets........................................................................... 415

Recap: Factors That Change the Exchange Rate .................................................................. 418

APPLICATION

  Effects of Changes in Interest Rates on the Equilibrium  

Exchange Rate ..................................................................................................420

APPLICATION

  The Global Financial Crisis and the Dollar .....................................422

APPLICATION

  Brexit and the British Pound ............................................................423

Summary 424  •  Key Terms 425  •  Questions 425  •  Applied Problems 426  •   

Data Analysis Problems  426   •   Web Exercises  427   •   Web References  427