Exchange rates affect international trade and investment from "summary" of Economics of Money, Banking and Financial Markets, Business School by Frederic S. Mishkin
Exchange rates play a crucial role in determining the levels of international trade and investment. When a country's currency appreciates, its goods and services become more expensive for foreign buyers. This can lead to a decrease in exports as foreign customers seek cheaper alternatives. On the other hand, a depreciation of a country's currency makes its exports more competitive in the global market, leading to an increase in export levels. Similarly, exchange rates also impact international investment decisions. A stronger currency makes foreign investments more attractive as investors can purchase more assets in the foreign country for the same amount of their domestic currency. Conversely, a weaker currency may deter foreign investors as their returns may be eroded when repatr...Similar Posts
The financial system is interconnected and complex
The complexity and interconnectedness of the financial system are evident in the multitude of relationships and transactions th...
The Phillips curve shows the tradeoff between inflation and unemployment
The Phillips curve is a fundamental concept in economics that illustrates the relationship between inflation and unemployment. ...
Technology drives progress
Technology has been a driving force behind progress throughout history. From the invention of the wheel to the development of t...
Economic systems vary in how they allocate resources and distribute goods and services
Different economic systems have their own unique ways of deciding how resources should be allocated and goods and services dist...
Comparative advantage drives specialization in trade
The concept of comparative advantage lies at the heart of international trade theory. It refers to the ability of a country to ...
Keep a longterm perspective on investment returns
Investing is not a sprint; it's a marathon. You cannot expect to see significant returns overnight. It takes time for investmen...
The Federal Reserve's actions had a major impact on the economy during the 1930s
The Federal Reserve's actions in the 1930s played a crucial role in shaping the economic landscape of the United States during ...
Market participants seek to exploit opportunities for profit
Market participants are constantly on the lookout for opportunities to make profits. These opportunities could arise from vario...
The central bank conducts monetary policy to influence the economy
The central bank plays a crucial role in influencing the economy through its monetary policy. Monetary policy refers to the act...
Continuously evolve and improve as a forex trader
The key to success in the forex market is to always be looking for ways to evolve and improve as a trader. The market is consta...