5 cents 3 we multiply 125 cents times 1000 pesos and

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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 Power 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? ECONOMIC 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 1. Define: a. exchange rate b. flexible exchange rate system c. depreciation d. appreciation Reviewing Facts and Concepts 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 Concepts 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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This document was uploaded on 01/16/2014.

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