ECON 162 Lecture Notes - Lecture 25: Japanese Yen, Arbitrage, Xm Satellite Radio
26 Oct 2016
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Econ 162 - lecture 25 - currency and exchange rates. Gdp = c + i + g + (x - m) Products produced at home and sold abroad. Products produced abroad and purchased at home (x - m) = net exports. Value of one country"s currency in terms of another country"s currency. Large banks in major cities around the world where exchange of currency takes place. An increase in the value of a currency. A decrease in the value of a currency. Models of exchange rate determination: purchasing power parity theory. Long run trends: supply and demand analysis. Currencies should have the same purchasing power in different countries. International arbitrage: process of buying in a low-price country and selling in a high- price country. E = exchange rate (in units of home currency per unit of foreign currency) To find p^f = p/e = 50/. 01 = 5000. As wheat is shipped from u. s. to japan:
