Click these links first:
Link 1
Link 2
Especially important is EVALUATION
Link 3
Link 4
Link 5
Link 6
Link 7
Link 8
Link 9
Link 10
Link 11 - a very important one!
Now read the following
The foreign exchange rates help us determine the value of one currency in terms of another currency. The foreign exchange market is a global 24-hour market where traders from around the world buy and sell currencies for various purposes including speculation, and hedging. When you travel to another country you will need to convert your money into that country’s currency to buy stuff there.
As traders buy and sell currencies, the foreign exchange rates fluctuate constantly based on the laws of demand and supply. A currency that is in more demand compared to another currency becomes more expensive relative to other currencies and so on.
Link 1
Link 2
Especially important is EVALUATION
Evaluation points on the effects of exchange rate changes
Changes in the exchange rate have quite a powerful effect on the economy but we tend to assume ceteris paribus – all other factors held constant – which of course is highly unlikely to be the case
- Counter-balancing use of fiscal and monetary policy: For example the government can alter fiscal policy to manage AD
- Time lags – it takes time for demand for exports and imports to change following a movement in the currency. Businesses need to have the capacity and access to credit to expand their production.
- Low price elasticity of demand: In the short term, the effects of exchange rates on export and import demand tends to be low because of low price elasticity of demand
- Business response to the challenge of a high exchange rate: Businesses can and do adapt to a high exchange rate. There are several ways in which industries can adjust to the competitive pressures that a strong pound imposes. Some of the options include:
- a) Cutting their export prices when selling in overseas markets and therefore accepting lower profit margins to maintain competitiveness and market share
- b) Out-sourcing components from overseas to keep production costs down
- c) Seeking productivity / efficiency gains to keep unit labour costs under control or perhaps trying to negotiate a reduction in pay levels
- d) Investing extra resources in new product lines where demand is price inelastic and less sensitive to exchange rate fluctuations. This involves producing products with a higher income elasticity of demand, where non-price factors such as product quality, design and effective marketing are as important in securing orders as the actual price
Link 3
Link 4
Link 5
Link 6
Link 7
Link 8
Link 9
Link 10
Link 11 - a very important one!
Now read the following
The foreign exchange rates help us determine the value of one currency in terms of another currency. The foreign exchange market is a global 24-hour market where traders from around the world buy and sell currencies for various purposes including speculation, and hedging. When you travel to another country you will need to convert your money into that country’s currency to buy stuff there.
As traders buy and sell currencies, the foreign exchange rates fluctuate constantly based on the laws of demand and supply. A currency that is in more demand compared to another currency becomes more expensive relative to other currencies and so on.
From time to time, you will need to interpret the exchange rates for your country vis-à-vis another country. For example, if you have some business in India, then you need to convert your earnings in Indian rupee (INR) back to your domestic currency (U.S. dollars for American companies).
The first thing that you need to do is determine the current exchange rate. In this case the USD/INR exchange rate. You can check the rates on websites such as XE.com, or even Google provides exchange rates in its search results.
