Draw a figure such as Figure 12.1 to illustrate equilibrium for a particular currency in the foreign-exchange market.

 Now, show what would happen to the exchange rate (under flexible rates) and the country’s official settlements balance if the demand for foreign currency were to fall. What type of real world event could cause such a fall?

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12000 HANDFURT NEW YORK LONDON 800 dating DON GMT 2100 - 2000 -T 1500 --6 1700 1600 -3 4 J 1500 1400 1300 -2 1200 1100 1000 0500 -1 0 +1 +2 +3 Hour different from GMT +4 SINGAPORE HONG KONG TOKYO 0700 0600 0500 0400 +5 +6 +7 Hour different from GMT TOKYO 300 0200 2400 +3 +10 +11