1. ECONOMICS UNIT #4 INTERNATIONAL ECONOMICS https://www. youtube
Exchange Rates

4. EXCHANGE RATES
Exchange rate-The value of a foreign currency in terms of the home nation’s currency
Fixed exchange rates-the currency is held constant against another currency
Floating/flexible exchange rates-allows the value of the currency to be established by supply and demand

5. appreciation-an increase in a currency’s value
depreciation-a decrease in a currency’s value

6. When a country’s currency value rises against another currency that currency has appreciated. If the country’s currency value falls against another currency, it has depreciated.

8. For example, if asked how much a U. S
For example, if asked how much a U.S. dollar costs in yen- it takes yen to buy one dollar. If asked how many U.S. dollars it takes to purchase a Thai baht- it takes three cents or .03 of a dollar to buy a baht. If asked how many pounds it would take to buy a $10 meal in the U.S., multiply .49 times $10 and say that it will take 4.90 pounds to purchase the meal. If asked how many dollars it takes to buy a 15 euro train ticket, take $1.44 times 15 Euros for a total of $21.60 for the train ticket.

9. Foreign unit in dollars Dollar in foreign units
Exchange Rate Table
Country (currency)
Foreign unit in dollars
Dollar in foreign units
Pokemon .1 10
Wonderland
.05 20
Neverland 2
.50
Foreign unit in dollars=How many US dollars it takes to get
one unit of their money
Dollar in foreign units=How much of their money it takes
to get one US dollar

10. Flexible Exchange Rates
Determinants of exchange rates
Factors that shift demand/supply
Changes in tastes
Relative income changes
Relative price-level changes
Relative interest rates
Relative expected returns on assets
Speculation
38-10

12. Fill in the missing currency figures
Country (currency)
Foreign unit in dollars
Dollar in foreign units
Australia (dollar)
.9369
Hong Kong (dollar)
7.7813
Israel (sheqel)
.2733
Russia (ruble)
Saudi Arabia (riyal)
.2667

13. Assume that $2=1 British pound
How much would a 4 pound lunch cost in dollars?
How much would a 10,000 pound car cost in dollars?
How much would a 200,000 pound house cost in dollars?
How much would a $50 shirt cost in pounds?
How much would a $10,000 car cost in pounds?
How much would a $250,000 house cost in pounds?

14. Yen price
of one $ S
200 D
Quantity of $
State the exchange rate two ways.
How much would a $10 meal cost in yen?
How much would a 1,600 yen movie ticket cost in $?
Suppose that demand for the $ increased. Which would appreciate: dollar or yen?
Suppose that demand for the $ decreased. Which would depreciate: dollar or yen?

15. 6. Suppose the dollar appreciates against the yen.
A. Give one group of Americans who would benefit from this.
B. Give one group of Americans who would be affected negatively by this.
C. Give one group of Japanese who would benefit from this.
D. Give one group of Japanese who would be affected negatively by this.

16. 7-10. Fill in the missing figures
Country (currency)
Foreign unit in dollars
Dollar in foreign units
Britain (pound)
.656
Europe (euro)
1.366
Mexico (peso)
12.76
Japan (yen)
.011

17. 11. Suppose European banks offer higher interest rates for savings accounts than the American banks. What would you expect to happen to the Euro?
12. Suppose Britain has 5% inflation but the US only has 1% inflation. What would you expect to happen to the British pound?