Foreign Exchange
-buying and selling of currency
-Any transaction that occurs in the balance of payments necessities foreign exchange
-the exchange rate is determined in the foreign currency markets
Changes in Exchange Rates
-exchange rates are a function of the supply and demand for currency
Exchange Rate Determinants
-consumer taste
-relative work
-relative price level
-speculation
Exports and Imports
-appreciation of dollar causes price of goods to go up; reducing exports and increasing imports
-depreciation of dollar causes price of goods to be cheaper; increasing exports and reducing imports
Specialization
-Individuals and countries can be made better off if they will provide in what they can have a comparative advantage and then trade with others for whatever else absolute advantage
-The producer that can produce the most output or requires that least amount of inputs (resources)
Comparative Advantage
-The producer with the lowest opportunity cost
-countries should trade if they have a lower opportunity cost
-an output problem presents the data as products produced given a set of resources
-an input problem presents the data as mount of resources needed to produce a fixed amount of output
-When identifying absolute advantage input problems change the scenario from who can produce the most to who can produce a given product with the least amount of resources
No comments:
Post a Comment