- Use xe.com (Links to an external site.) determine the following:
- The $US price of a £25,000 British (UK) Mini Cooper
- The South African Rand price of a $300 U.S. Ipad
- The Euro price of a ¥50,000 Japanese Aibo (electronic dog)
- The Mexican peso price of a 45,000 Indian Rupee carpet
- Has the Mexican peso appreciated against the $US in the last year?
- Assume Tesla makes ¥120,000,000 in profits one month selling cars in Japan. In that same month, the exchange rate moves from 120 ¥/$ to 100 ¥/$. Does this help or hurt Tesla’s profits and by how much? What lesson can be drawn from exchange rate depreciation for firms that earn substantial overseas profit?
Use Google Drawings (Links to an external site.) to graph show the impact of these events (or just do it on a piece of paper). Also note how this would be shown in the US balance of payments.
Do you want a review? If so, here you go:
- Unemployment increases in Mexico (which decreases spending power)
- US inflation (pus) > Mexico inflation (pm)
- Mexican Central Bank increases interest rates
- The number of Mexican citizens working in the US (and sending money home) increases
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