1 / 17

Exchange Rates

Exchange Rates. Lesson 14 – Money around the world. Exchange Rate. The price of one nation’s currency in terms of another nation’s currency Fixed – prevented from rising and falling with changes in supply and demand Flexible – free to float with changes in the supply and demand.

reese
Download Presentation

Exchange Rates

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Exchange Rates Lesson 14 – Money around the world

  2. Exchange Rate • The price of one nation’s currency in terms of another nation’s currency • Fixed – prevented from rising and falling with changes in supply and demand • Flexible – free to float with changes in the supply and demand

  3. Factors that affect exchange rates • Changes in preferences for foreign goods • Relative incomes • Inflation • Interest rates • Speculation on future values of foreign exchange

  4. Changes in preferences • More Americans want to buy Japanese goods – yen would be worth more dollars because demand for yen would increase and supply of US dollars would decrease

  5. Changes in prices in different countries • High inflation in Russia would make Russian goods more expensive than American goods. Russians would demand more US $$ to buy cheap US goods (supply more Russian rubles, demand more US $$$) dollar would be worth more

  6. Changes in interest rates in different countries • 10% on savings in Europe and 2% savings in US, Americans would demand more Euros and supply more $$$ • Euro would be worth more dollars

  7. Changes in income in different countries • Income in US increases compared to Mexico. People in the US buy more Mexican goods. More supply of US $$$ and more demand for pesos • Dollar would be worth fewer pesos

  8. Speculation • People think the dollar will increase in value compared to the Euro, they will buy more $$$ (demand) and sell more Euros(supply) • Dollar would be worth more Euros

  9. If the foreign exchange rate between the Australian Dollar and the Indian Rupee is 1:1.57 then 3 Indian Rupees equals how many Australian Dollars?

  10. If the foreign exchange rate between the American Dollar and the Australian Dollar is 1:1.50 then 24 Australian Dollars equals how many American Dollars?

  11. If the foreign exchange rate between the Australian Dollar and the Hong Kong Dollar is 1:2.80 then 56 Australian Dollars equals how many Hong Kong Dollars?

  12. If the foreign exchange rate between the Mexican Peso and the Botswana Pula is 1:0.40 then 85 Mexican Pesos equals how many Botswana Pulas?

  13. 3 currencies • 1 WELCO = 2 DEVCOs • 1DEVCO = 2 LESCOs • 1 WELCO = 4 LESCOs • If a bicycle cost 25 DEVCOs, what is the price in WELCOs? LESCOs?

  14. Depreciating currency • A currency depreciates when it buys less of another currency

  15. Effects of Depreciation • If you go to Italy on vacation and the $ is worth less, you have less money to buy local souvenirs. • If you are an American business and you buy parts from France, your resource costs will increase • If you are a Japanese firm and you buy solar equipment from the United States, you will buy more

  16. Appreciating currency • A currency appreciates when it buys more of another currency

  17. If you go to Japan on vacation and the $ is worth more, you have more money to buy local souvenirs. • If you are an American business and you buy parts from Spain, your resource costs will decrease • If you are an Israeli firm and you buy planes from the United States, you will buy less

More Related