Lecture_15

Lecture_15 - Lecture 15 Econ 2 Tracking the Economy...

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Lecture 15 Econ 2
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Tracking the Economy
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Tracking the Economy
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Exchange Rates Nominal Exchange Rate The rate at which two currencies can be traded for each other
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Exchange Rates Can be flexible or fixed Flexible: changes with the supply and demand for the currency Fixed: fixed or “pegged” to some other major currency
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Exchange Rates American Dollar 1 USD in USD Australian Dollar 1.07308 . 931897 Brazilian Real 1.6673 0.599772 British Pound 0.50153 1.9939 Canadian Dollar 0.9897 1.01041 Chinese Yuan 7.1075 0.140696 Danish Krone 4.8738 0.205179 Euro 0.654365 1.5282 Hong Kong Dollar 7.7897 0.128375 Japanese Yen 103.99 0.00961631 Mexican Peso 10.7015 0.0934448
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Exchange Rates How many pesos will one British pound buy? A) 0.09 B) 0.50 C) 1.99 D) 10.70 E) 21.37
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Exchange Rates How many pesos will one British pound buy? E) 21.37
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Exchange Rates To get exchange rates between any two currencies: $1 US = 0.50153 British pounds $ 1 US = 10.7015 Mexican pesos 0.50153 pounds = 10.7015 pesos 21.37 pesos per pound
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Exchange Rates Appreciation An increase in the value of a currency relative to other currencies Depreciation A decrease in the value of a currency relative to other currencies
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Changes in the Supply of Dollars Factors that increase the supply of dollars An increase in the preference for Japanese goods An increase in U.S. real GDP An increase in the real interest rate on Japanese assets The Determination of the Exchange Rate in the Short Run
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An Increase in the Supply of Dollars Quantity of dollars traded Yen/dollar exchange rate D S e* E Increase in demand for Japanese video games e*’ S’ F Supply of dollars increases from S to S’ The value of the dollar in terms of yen falls e* falls to e*’
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Changes in the Demand for Dollars Factors that increase the demand for dollars Increased preference for U.S. goods Increase in real GDP abroad An increase in the real interest rate on U.S. assets The Determination of the Exchange Rate in the Short Run
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A Tightening of Monetary Policy Yen/dollar exchange rate Quantity of dollars traded e*' F S' The increased demand for U.S.
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This note was uploaded on 01/29/2010 for the course ECON 3A taught by Professor Loster during the Summer '07 term at UCSB.

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Lecture_15 - Lecture 15 Econ 2 Tracking the Economy...

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