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exchange rates and how if affects our finances

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exchange rates and how if affects our finances

1. In our day to day world, we don’t think about exchange rates and how if affects our finances however, if we put things into perspective just with an item in the grocery store for e.g. Olive Oil, there are various brands of Olive oil but if you are a person who only prefers the taste of  Olive oil from Italy or Spain, you will search until you obtain the brand you really desire.  The fact is that bottle of oil came from another country, so the grocery store owner paid the price of the exchange rate and the distributor and you the consumer.  In our text the definition of the nominal exchange rate is: “The rate at which a person can trade the currency of one country for the currency of another”. (Mankiw, G. N. p. 670).  If we take this currency trade a bit further, the currency is purchased for the supply and demand for good and or services.

The country that I have been using during this course is Trinidad and Tobago, the current exchange rate as per x-rates.com is $6.67 TTD=$1USD.  (http://x-rates.com).  Now for the past years until recently the exchange rate was $6.50TTD=$1USD, so now it has appreciated to $6.67 TT-dollars to $1USD, citizens are in some ways not estatic about the appreciation, because they feel it will increase prices on foreign goods that are purchased in the country.

Further research into the graphs on x-rates.com shows that the exchange rate for Trinidad and Tobago had actually depreciated between the months of April to middle of June 2016, from $6.50 to $6.37 this can be as a result of a unstable and fluctuating global economy, which can impact countries all over the world. The major export of Trinidad and Tobago is petroleum, natural liquid gas and methanol,(http://ciafactbook.gov). in the last quarter the demand for these goods have been decreased, due to unstable and fluctuating global economy.

WC:321.

References:

Trinidad and Tobago Economy. (2016, July 07). Retrieved August 16, 2016, from www.cia.gov

Mankiw, G.N. (2015). Open Economy Basic Concepts:In Principles of Economics(7th ed.,p.670) Cengage Learning, Stamford, CT.

Trinidad and Tobago Exchange Rates.(2016, August 14).Retrieved August 16, 2016, from http://www.x-rates.com

 

 

 

2.    When it comes to a “strong” dollar it tends to have its negatives and positives and reasons being is because of the value it carries. No matter where you go currency plays a huge role in any country. In order to visit places one needs money, in order to buy things in that country one needs money as well and in order to invest into things you would also need money. When it comes to US dollars there are some pros and cons to it. A few positive things about a strong dollar is that imports are a lot cheaper and are able to purchase more items. A lot of foreign countries also benefit from this because they will earn more income due to having more sales in the United States. On the other hand there are a few negatives about a strong dollar as well, one of them includes tourism and its because it tends to be a little more expensive because of the dollar value here. Foreign money really isn’t worth much when you’re exchanging for US dollars and explains to why it can become expensive for tourists. So as I’ve mentioned that having a strong dollar can have its pros and cons.


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