Econ: Exchange Rates

What might cause the value of the U.S. dollar to appreciate in relationship to the euro?

•  Increased demand for European products in the U.S.

• Increased demand for U.S. products in Europe.

• Increases in the U.S. money supply

• High rates of inflation in the U.S.

One advantage of a weak dollar is that… ?

• travel abroad is cheaper for Americans.

• American income tax rates go down.

• Imports are cheaper for Americans to buy.

• American exports increase.

What must first take place in order for one country to trade with another?

• Decide what they will trade.

• Exchange currency for the currency accepted by the trading country.

• Agree to export

• Agree in import

What is an exchange rate?

• The rate at which goods are exchanged between two countries

• The price of one nation's currency in terms of another's

• How many US dollars you can exchange for RMB at Travelex

• The price of goods in terms of a foreign currency

Why do changing exchange rates help one country and hurt the other?

• One side loses purchasing power and the other gains it

• Takes money away from one side and gives it to the other

• Causes war between the two countries

• One country's government introduces tariffs to protect local industries

What does it mean when an economist says a currency is stronger?

• It can be exchanged for more of a lesser foreign currency

• It can be converted to prices in any currency

• There a few things it could buy

• It will buy fewer foreign goods

What is a decrease in the value of a currency?

• Appreciation

• Depreciation

• Inflation

• Absolute advantage

If the US dollar is weak, will our exports increase or decrease?

• Increase

• Decrease

What is the value of a nations currency in relation to a foreign country?

• Trade Deficit

• Foreign Exchange Market

• Exchange Rate

• Trade Surplus

The producer that can produce the most output OR requires the least amount of inputs (resources)

• Comparative Advantage

• Trade Offs

• Absolute Advantage

• Opportunity Cost