Macroeconomics monetary policy/Speculation
Once you understand how money can be traded like any other commodity, you need to understand how. In this section, OpenStax College: "Macroeconomics, Chapter 16, Section 1: How the Foreign Exchange Market Works" you learn that exchange rates relate the price of a country's own currency compared to the price of another country's currency, mainly for the purpose of international trade. Trading partners need to convert their own currency into that of the country from which imports originate. For example, when the United States imports vehicles from Japan, the United States pays for them in Yen and needs to purchase that currency using US Dollars. In essence, the demand for and supply of currencies determine the exchange rate.
Next read Lawrence Mitchell’s “Financial Speculation: The Good, the Bad, and the Parasitic". In it, Mitchell explains how expectations play a role in terms of changes in the price of a stock. Speculators tend to focus on changes in prices and attempt to sell at a price higher than they bought the stock. You will learn that a stock is a share of ownership in an organization, and its price is determined largely by the supply of and the demand for stocks in the stock market.
Having read these texts, jot down any of your reflections, thoughts or questions on this subject in a WeNotes post.
