comparative advantage and exchange rates econ

comparative advantage and exchange rates econ - ECON103-...

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Unformatted text preview: ECON103- Principles of Macroeconomics Exchange rates- examples- If the exchange rate of yen per dollar increases from 100yen=$1 to 110yen=$1, then that means that the dollar has depreciated.- If the exchange rate between the yen and the dollar changed from 110yen=$1 to 100yen=$1, then the dollar has appreciated.- A depreciation of Israel’s currency means that Israel’s imports will become more expensive.- If a US made machine costs $500 and the exchange rate was 100yen= $1 yesterday. Bur the exchange rate today is 90yen=$1. You know then that the machine would now cost the Japanese firm less yen.- If the Mexican government devalues its peso, it is intentionally decreasing the value of the peso.- An unfavorable balance of trade occurs when the value of exports is less than the value of imports- If you were told that the exchange rate was 1.5 US dollars per 1 Canadian dollar that would mean that Canadians would have to spend $8CDN to buy a $12 watch in NYC- If you put money aside to go to Mexico, and on your flight to Cancun a passenger seated next to you says: “ Did you hear the good news? We can do and buy more on our vacation now!” You ponder that comment and come to the conclusion that perhaps the exchange rate, pesos per dollar increased. - An exchange rate is said to be flexible id it is a free market rate- Who benefits when the exchange rate of Japanese yes per dollar increases?...
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This note was uploaded on 02/23/2012 for the course POSI 1310 taught by Professor Arnold during the Fall '08 term at Texas State.

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comparative advantage and exchange rates econ - ECON103-...

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