Today’s Schedule – 12/19 Present International Trade Posters Exchange Rates PPT Homework – Bring calculator tomorrow – Read 19.1 – Study Ch. 18 Quiz- Taking.

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Presentation transcript:

Today’s Schedule – 12/19 Present International Trade Posters Exchange Rates PPT Homework – Bring calculator tomorrow – Read 19.1 – Study Ch. 18 Quiz- Taking Monday after break

Exchange Rates Value of a foreign currency in terms of the home nation’s currency Can’t use the US Dollar everywhere!!

Calculating Exchange Rates Example: – Staying in a hotel in Mexico costs 500 pesos/night – Current exchange rate is 1 US Dollar = 10 pesos – 500 pesos/10 pesos = $50

Calculating Exchange Rates Reverse Example: – Staying in a hotel in Mexico and don’t want to spend more than US$70 a night – Current exchange rate is 1US Dollar = 9 Pesos – 70 x 9 = $630 Pesos

Strong and Weak Currencies When the value of a currency increases or appreciates, it becomes stronger – Ex: Then: 1 US Dollar = 100 Yen; Now: 1 US Dollar = 110 Yen Dollar has appreciated

Strong and Weak Currencies When the value of a currency decreases or depreciates, it becomes weaker – Ex: Then: 1 US Dollar = 100 Yen Now 1 US Dollar = 83 Yen

Exchange Rate Systems Most countries operate on a flexible exchange rate system where exchange rates are determined by S & D Some use a fixed exchange rate – Often a new/struggling economy will fix its exchange rate to a stronger currencies (i.e. Pesos and US Dollar) Why would the U.S. do this?