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Unformatted text preview: y for 1 peso,
which is 12.5 cents; (3) we multiply 12.5
cents times 1,000 pesos and get $125. Your
friend says that he was willing to buy the
jacket for $100, but that he is not willing to
pay $125 for the jacket. The economic concept illustrated by this example is simply
that when one’s domestic currency depreciates (as the dollar did in the example), it
becomes more expensive to buy foreignproduced goods. Reduced Bargaining
According to The Economist,
“The entry of China’s vast army
of cheap workers into the international system of production and
trade has reduced the bargaining power
of workers in developed economies [such as the United
States]. Although the absolute number of jobs outsourced from developed countries to China remains
small, the threat that firms could produce offshore
helps to keep a lid on wages.” In other words, workers
in countries such as the United States are afraid to push
for higher wages from their employers because the
threat of moving jobs to China hangs over their heads.
If globalization can affect wages in the
United States, can it affect wages in China
too? Would you expect with increased globalization
that wages in China will rise, fall, or stay constant?
THINKING Dollar depreciates → Foreign goods become
more expensive The flip side of this concept is that when
one’s domestic currency appreciates, it
becomes cheaper to buy foreign-produced
goods. Suppose the dollar-peso exchange rate Defining Terms
a. exchange rate
b. flexible exchange rate
d. appreciation Reviewing Facts and
2. If the exchange rate is $1
¥129 (yen) and the
price of a Japanese good
is ¥7,740, what is the
equivalent dollar price? changed to $1 12 pesos. Now a jacket with
a price tag of 1,000 pesos would cost $83.33.
Dollar appreciates → Foreign goods become
cheaper 3. If the exchange rate is $1
£0.6612 (pounds) and
the price of a U.S. good is
$764, what is the equivalent pound price? Critical Thinking
4. Steve, an American in
London, wants to buy a
British-made sweater. The
current price of the
sweater is £40. Would
Steve be better off if the
exchange rate is $1 £0.87 or $1 £0.77?
Explain your answer. Applying Economic
5. Are more Americans
likely to travel to Mexico
when the peso has appreciated relative to the dollar or when the peso has
depreciated relative to the
dollar? Explain your
answer. Section 3 The Exchange Rate 419 15 (390-427) EMC Chap 15 11/18/05 9:13 AM Page 420 Jobs: Location Matters . . . Sometimes W hen it comes to some
jobs, location matters.
When it comes to other jobs, location
does not matter. Let’s look at some
examples of both situations.
Understanding the difference may
help you choose a career with
greater job security. Location Matters
If you are sick, and need a doctor,
you prefer to have a doctor close to
you. If you live in Salem, Virginia, you
will probably want a doctor who
works in Salem, Virginia, not in
Bangkok, 8,914 miles away.
If you need a plumber, you will
probably want a plumber close by,
not one on the other side of the
world. If you want to go out to eat,
you will most likely go to a restaurant near where you live, not one on
the other side of the world.
When it comes to some services,
you want the provider to be near you.
So if you are at point X, you want
your provider to be near point X too. Location Doesn’t Matter
When it comes to buying a book,
it may not matter to you where the
book seller resides, as long as you
can get the book fairly quickly. When
it comes to someone answering your
technical computer questions, it may
not matter where the technician
lives. As long as the technician
speaks your language, listens well,
and gives clear and concise instructions, you probably don’t care where
he or she is located. Offshoring/Outsourcing
When a provider’s (supplier’s,
worker’s) location is important to you,
you can be fairly sure that the kind of
job the provider performs will not be
offshored to another country. When a
provider’s location is not important to
you, the probability of the provider’s
job being offshored rises.
In 2004, Forbes magazine ran a
story titled “Ten Professions Not
Likely to Be Outsourced.”
Here is the list: 1. Chief Executive Officer (of a
company). In 2002, 553,000
chief executive officers in the
United States headed various companies. That number was expected
to rise to 645,000 in 2012.
Although many CEOs earn milliondollar salaries, the median salary in
2002 was $126,000. Why won’t
the jobs of CEOs be offshored?
Essentially because they are at the
head of the company.
2. Physician and Surgeon. In
2002, physicians and surgeons
numbered 583,000, with an
increase to 697,000 expected by
2012. The median pay in 2002
was $138,000. (Within the medical field, salaries vary widely. For
example, orthopedic surgeons
may earn $200,000–$300,000
more than a psychiatrist.) Why
won’t such jobs be offshored? It is
hard to perform surgery at a di...
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