EC249 Lecture Notes - Lecture 3: Currency Union, International Trade, Currency Substitution
Document Summary
Direct: the canadian dolla(cid:396) (cid:894)c p(cid:396)ice of one eu(cid:396)o (cid:894) (cid:1005). (cid:1004)(cid:1004)(cid:895): . (cid:1008)(cid:1009) (always use) Changes in demand and supply for the foreign currency market. Equivalently, the euro has appreciated relative to the dollar; it is now more valuable and can buy more dollars. Equivalently, the euro has depreciated relative to the dollar; it is now less valuable and can buy fewer dollars. E$/ the dolla(cid:396) (cid:894) has dep(cid:396)eciated and the eu(cid:396)o (cid:894) (cid:895) has app(cid:396)eciated. E$/ the dolla(cid:396) (cid:894) has app(cid:396)eciated and the eu(cid:396)o (cid:894) (cid:895) has dep(cid:396)eciated. To compare the prices of foreign-produced goods to prices of similar goods produced domestically we need to express both prices in a common currency. To accomplish that we use exchange rates to translate foreign prices into domestic currency. Where, pie is the price in euros, pic is the price in canadian dollars.
