Discussion

While the video provides a reason why a country may want to manipulate the value of it's currency, doing so is usually a violation of the free trade rules for fully floating currencies. The Chinese Yuan is a managed float currency, while the US Dollar is fully floating. You will examine these terms this week.

Note: The video has Closed Captioning. To activate it, start the video, mouse over the bottom of the video and click on the CC icon, then select from the menu.

This week we are going to look more globally and examine exchange rates.

An exchange rate is simply the price of one currency in terms of another currency. In other words, how many US Dollars does it take to buy one British Pound? Remember that an exchange rate ALWAYS involves two currencies which means two countries. Review in detail, the three Exchange Rate presentations before you start your work on this week's discussion assignment.

The Exchange Rates Part I presentation is below and can also downloaded as a Powerpoint presentation by clicking: Exchange Rates.

Then review the downloadable Exchange Rates Part II Powerpoint presentation by clicking: here. (Part III is linked later in the instructions.)

While they are conceptually simple, many economic factors go into the determination of exchange rates. And exchange rates influence many of the prices you pay in the store, they influence the number of jobs in the export sector of the economy and they even impact the price of a cup of coffee.

Many people believe that a "strong" US Dollar is critical to the strength of the US economy. A "strong" dollar means one that can buy a goodly amount of a foreign currency. But does a "strong" dollar really benefit the US economy? And if so, in what ways? And in what ways does it harm the US economy? Review the Powerpoint presentation: Exchange Rates Part III before continuing with the week's discussion.

Now we are ready to examine how exchange rates are set and what the impacts on the US economy from a "strong" dollar versus a "weak" dollar actually are.

Assignment Summary:

1) Watch the above video and study the three Exchange Rate Powerpoint presentations;

2) Read the article in the textbook: "Is a Strong Currency Always in a Nation's Interest?", page 700-701 (Week 4.pdf);

3) Go to the X-Rates Web site (http://x-rates.com) and find the current:

a) exchange rate for the US Dollar (USD) and any other country's currency that you wish to study - you can select the same country that you are using for your research project, (unless it is the Peoples' Republic of China). Do NOT select the Chinese Yuan as your other currency since it is not a freely floating currency;

b) then from the icons below the currency selection boxes, select Graphs and then select 1 year;

c) based on the 12 months of data, which currency is appreciating (gaining value) and which is depreciating (losing value)? Remember it can do both in a year.

d) Now go to the CIA World Factbook and find out what goods and products the country you chose exports.

4) Since most all of the goods that you buy are either imported or contain inputs from other countries, what do the trends in the exchange rates you examined tell you about the prices you can expect to pay for goods imported from the country you choose or for products that use inputs from that country (i.e., the exports of your country)?

In a global economy most products contain materials from other countries and that includes food. If you had orange juice today, it may well have come from Brazil. Your computer and your cell phone contain parts from America or Japan or Taiwan or Thailand or one of the European countries or from all of these places. Thus, exchange rates directly impact the prices you pay for goods. This is your chance to learn more about how that works.

5) On the discussion board, share your findings about whether the currency of the country you chose is appreciating or depreciating relative to the US Dollar.

What do you think this means for American imports from your country?

What do you think it means for American exports to your country?

Refer to at least two different concepts from this week's Chapters. Your illustration of the concepts MUST include an explanation why you think they are relevant to the week's topic using specific information from the articles, Powerpoint presentations, videos and other research that you have done. Remember to include citations and references as needed.

6) Post on three different days for a minimum of three posts. Failure to meet these minimum posting requirements results in point loss.

Include a word count on each post. All of your posts should sum to a minimum of 500 words. Each post submitted should be between 150 and 250 words. Keep them short, specific, and clear.

Use paragraphs as appropriate.

Very lengthy posts do not provide an incentive to be read.

Remember to document all use of sources by using citations and references. These should be in APA format.

Please review Plagiarism Powerpoints (PLAGIARISM.ppt) and be sure to provide references (APA.ppt), including URLs where appropriate, to all works that you cite.

Be sure to respond to comments or questions from your instructor. If you do not respond to the posts sent by your instructor, your grade will be significantly affected.