Week 4 discussion - Economics
Week 4 DISCUSSION
https://youtu.be/xwtgByffoUw
While the video provides a reason why a country may want to manipulate the value of its currency, doing so is usually a violation of the free trade rules for fully floating currencies. The Chinese Yuan is a managed float currency, while the US Dollar is fully floating. You will examine these terms this week.
Note: The video has Closed Captioning. To activate it, start the video, mouse over the bottom of the video and click on the CC icon, then select from the menu.
This week we are going to look more globally and examine exchange rates.
An exchange rate is simply the price of one currency in terms of another currency. In other words, how many US Dollars does it take to buy one British Pound? Remember that an exchange rate ALWAYS involves two currencies which means two countries. Review in detail, the three Exchange Rate presentations before you start your work on this weeks discussion assignment.
The Exchange Rates Part I presentation is below and can also downloaded as a Powerpoint presentation by clicking: Exchange Rates .
Then review the downloadable Exchange Rates Part II Powerpoint presentation by clicking: here . (Part III is linked later in the instructions.)
While they are conceptually simple, many economic factors go into the determination of exchange rates. And exchange rates influence many of the prices you pay in the store, they influence the number of jobs in the export sector of the economy and they even impact the price of a cup of coffee.
Review the Powerpoint presentation: Exchange Rates Part III before continuing with the weeks discussion.
Now we are ready to examine how exchange rates are determined. Assignment Summary:
Watch the above video and study the three Exchange Rate Powerpoint presentations;
Go to the X-Rates Web site (http://x-rates.com) and find the current:
exchange rate for the US Dollar (USD) and any other countrys currency that you wish to study - you can select the same country that you are using for your research project or any other country whose currency is published at the website and it fluctuates in relation to the Dollar or Euro.
then from the icons below the currency selection boxes, select Graphs and then select 1 year;
based on the 12 months of data, which currency is appreciating (gaining value) and which is depreciating (losing value)?
Now go to the CIA World Factbook and find out what goods and products the country you chose exports.
Since most all of the goods that you buy are either imported or contain inputs from other countries, what do the trends in the exchange rates you examined tell you about the prices you can expect to pay for goods imported from the country you choose or for products that use inputs from that country (i.e., the exports of your country)?
In a global economy most products contain materials from other countries and that includes food. If you had orange juice today, it may well have come from Brazil. Your computer and your cell phone contain parts from America or Japan or Taiwan or Thailand or one of the European countries or from all of these places. Thus, exchange rates directly impact the prices you pay for goods. This is your chance to learn more about how that works.
On the discussion board, share your findings about whether the currency of the country you chose is appreciating or depreciating relative to the US Dollar.
What do you think this means for American imports from your country?
What do you think it means for American exports to your country?
Refer to at least two different concepts from this week’s Chapters. Your illustration of the concepts MUST include an explanation why you think they are relevant to the week’s topic using specific information from the articles, Powerpoint presentations, videos and other research that you have done. Remember to include citations and references as needed.
MAKE SURE THAT YOU ADD SOMETHING NEW to the discussion.
Post on three different days for a minimum of three posts. Failure to meet these minimum posting requirements results in point loss. Include a word count on each post. All of your posts should sum to a minimum of 500 words. Each post submitted should be between 150 and 250 words. Keep them short, specific, and clear.
Use paragraphs as appropriate
Very lengthy posts do not provide an incentive to be read.
Remember to document all use of sources by using citations and references. These should be in APA format.
Please review Plagiarism Powerpoints ( PLAGIARISM.ppt ) and be sure to provide references ( APA.ppt ), including URLs where appropriate, to all works that you cite.Floating
Exchange
Rates
Money
Into
Other
Money
Exchange
Rate
The rate, ratio or price at which one currency trades
or exchanges for another currency.
! Say
you
want
to
buy
a
British
car,
a
Land
Rover
for
example.
You
go
to
your
local
dealer
and
you
buy
the
car
in
US
Dollars.
! The
dealer,
however,
has
to
pay
the
car’s
British
manufacturer
in
British
Pounds
-‐
GBP
(£).
! The
manufacturer
wants
British
Pounds
because
they
pay
their
workers,
their
rent,
their
British
suppliers
and,
of
course,
their
taxes
in
British
Pounds.
! How
does
the
car
dealer,
to
whom
you
paid
US
Dollars,
get
British
Pounds?
Sell
US
Dollars/Buy
British
Pounds
! Let’s
say
the
car
dealer
needs
to
pay
the
auto
manufacturer
GB
£100,000.
How
does
the
dealer
pay
the
manufacturer?
! The
dealer
will
go
to
the
bank
and
ask
the
bank
to
send
GB
£100,000
to
the
manufacturer.
! The
bank
will
go
into
the
Foreign
Exchange
Market
(the
market
where
currencies
are
bought
and
sold)
and
buy
GB
£100,000.
How
does
the
bank
buy
British
Pounds?
! They
buy
British
Pounds
by
selling
US
Dollars.
! (The
official
name
is
Great
Britain
Pounds
or
GBP
and
the
symbol
is
£.
But
the
common
term
is
British
Pounds.
This
presentation
uses
all
of
these
interchangeably.
Learning
things
like
this
is
part
of
learning
the
language
of
foreign
currencies.)
What
Is
The
Price?
! Both
the
US
Dollar
and
the
British
Pound
are
freely
floating
currencies.
! The
price
of
a
floating
currency
changes
based
on
supply
and
demand
of
the
currency.
The
price
can
change
several
times
in
a
day,
but
usually
not
by
much.
! For
floating
currencies,
the
Foreign
Exchange
Market
works
like
any
other
supply
and
demand
driven
market.
BUT
What
IS
The
Price?
! It
is
what
the
market
says
it
is
at
the
time
the
bank
wants
to
buy
GB
£100,000.
! For
example,
if
1
US
$
=
GB
£0.58
(the
actual
exchange
rate
on
July
1,
2014);
! Then,
to
buy
GB
£100,000
will
cost
US
$172,413.79
(100,000
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