International Economics and Trade Introduction to Economics Johnstown High School Mr. Cox

The Issue of Currency Apples to Oranges Exchange Rate Different currencies mean different things Dollar =/= Euro =/= Yen =/= Pound Gold standard? Nope! Only confidence of the American people! Exchange Rate Usually converted to American Dollars Trends American dollar has become increasingly inflated and more valuable

Trends Cont’d Despite Inflation, US Dollar is still performing well globally So well, it is the top valued currency in the world

Actually, very well Most nations actually keep their reserves (national piggy bank) in American Dollars

How does a strong currency impact a nation? Strong Currency – close in value to the USD (Euro, Yuan) Impacts More purchasing power for consumers domestically Decrease in domestic sales as foreign products become cheaper, therefore, imports would increase Strong corporations, promoting domestic investment How does a weak currency impact a nation? Weak Currency – farther away in value to the USD (Yen) Exports would increase because they would be demanded internationally Therefore, jobs and corporate growth will increase Weak domestic stock prices, promoting international investment

Counterfeiting The illegal replication of a currency Problems Illegal purchasing Fraudulent earnings INFLATION Many US laws have been passed to stop counterfeiting Stops Fed from regulating money supply

The Euro European Union Pros Cons A group of European countries that participates in the world economy as one economic unit and operates under one official currency Goal is to create a barrier-free trade zone and to enhance economic wealth by creating more efficiency within its marketplace. Pros No worries about exchange rate Promotes trade among member nations Cons Countries cannot implement specific monetary policies Countries are tied to performance of others, good or bad

Movements of the exchange rate between the U.S. dollar and the euro