19–1. (Converting currencies) An American business needs to pay (a) 10‚000 Canadian dollars‚ (b) 2 million yen‚ and (c) 50‚000 Swiss francs to businesses abroad. What are the dollar payments to the respective countries? (a) Canadian dollars: U.S dollar payment = 10‚000 Canadian $ x .8437 = $8‚437 In order to buy 10‚000 Canadian dollars‚ the American business needs $8‚299‚ given that the exchange rate is $0.8437 (b) Japanese yen: U.S. dollar payment = 2‚000‚000 yen x .004684 = $9‚368
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Haiti is a very unique in that the country accepts 3 types of currency for exchange of goods. The official currency for the country is the Haitian Gourde which includes paper bills as well as coins. Both the bills and coins contain historical figures that were pivotal to Haiti’s history and culture. As with most currency exchange rates‚ the rate between the US dollar and the Haitian Gourde changes based on the current market conditions. As of today March 10th‚ 2018‚ the exchange rate between
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all of them used the US dollar as the benchmark currency. Beginning of the Crisis: 2 July 1997‚ the Bank of Thailand (BoT) announces that the Thai baht which was pegged around 25 to the U.S. dollar for more than a decade will be allowed to float‚ due to the lack of foreign currency to support its fixed exchange rate. (Already used $33 billion in foreign exchange). With the economic growth U.S. Dollar begins to rise and Asian pegged currencies moved accordingly. Exports become more expensive
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become a major component of our global economy. However‚ with over 200 countries and 180 currencies in the world‚ countries cannot trade with each other without a way to pay each other in their currency. Thus‚ in order to trade‚ countries have developed a formula to convert their money to that of another country’s. That formula is the exchange rate. The exchange rate is the rate at which a country’s currency can be exchanged for that of another country. For example‚ lets consider the Chinese Yuan
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I believe that China pegged the value of its currency‚ the yuan‚ to the U.S. dollar in 1994 because at that time the United States was the world ’s number economy and its currency is considered a highly reliable financial instrument. The benefits of pegging the value of the yuan against the dollar include more control in regulating money supply‚ and managing exchange rate. Costs include that higher chance of the economy blowing up in a costly currency collapse (Goldstein‚ 2002‚ p. 3)‚ an example
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DEVALUATION OF CURRENCY. CAUSES OF INFLATION: • So what exactly causes inflation in an economy? There is not a single‚ agreed-upon answer‚ but there are a variety of theories‚ all of which play some role in inflation: 1. THE MONEY SUPPLY • Inflation is primarily caused by an increase in the money supply that outpaces economic growth. • Ever since industrialized nations moved away from the gold standard during the past century‚ the value of money is determined by the amount of currency that is in
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changing currency values. __F__ 2. Legal and economic differences among countries‚ although important‚ do NOT pose significant problems for most multinational corporations when they coordinate and control worldwide operations and subsidiaries. Comment: Legal and economic differences among countries do affect the worldwide operations and subsidiaries. ___T_ 3. When the value of the U.S. dollar appreciates against another country’s currency‚ we may purchase more of the foreign currency with a
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is national currency. B. In the absence of money‚ societies use a “barter” system in which goods are exchanged for goods. 1. Barter economies require a “Double Coincidence of Demand” in that the two market participants must each be supplying what the other demands. 2. Barter also implies negotiations over the exchange (a cost modern economies often avoid)‚ which have the economic cost of the time spent for each purchase an individual makes. C. In a more Modern System‚ paper currency is the means
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Economics Exam Notes Question 1. (Chapter 31‚ pg759) * Impact of interest rate on spending * Analysis of events which change interest rate in the market * Policies to manage inflation/recession Impact of interest rate on the economy (ripple effect) To lower interest rate | | To increase interest rate | | | | | | Central bank buy securities in open market operations and increases money supply | | Central bank sell securities in open market operations and increases
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company has already entered that result in foreign exchange exposures. A company may have a transaction exposure if it is either on the buy side or sell side of a business transaction. Any transaction that leads to an inflow or outflow of a foreign currency results in a transaction exposure. For example‚ Company A located in the United States has a contract for purchasing raw material from Company B located in the United Kingdom for the next two years at a product price fixed today. In this case‚ Company
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