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Suppose labor required per unit of following products for india and U.S is:
SILK PCs
INDIA 5 15
U.S. 20 5
SILK PCs
INDIA 180 40
U.S. 120 60
SILK PCs
INDIA 10 20
U.S. 5 15
SILK PCs
INDIA 180 40
U.S. 120 60
Leontiff paradox
WHAT AFFECTS EXCHANGE RATES?
Anything which affects prices of commodities also affects prices of
currencies
What is it?
DEMAND AND SUPPLY
WHAT CAN AFFECT DEMAND AND SUPPLY?
INFLATION
INTEREST RATES
BOP
MONETARY POLICY
EXPECTATIONS.
APPERECIATION/DEPRECIATION OF A CURRENCY
Suppose one pound is of Rs.80 in period 0 and becomes Rs. 85 in period 1. what
is the percentage appreciation/depreciation in rupee and pound.
During 2002 yen went from $0.007404 to $0.0084746. By how much did the yen
appreciate against the dollar?
By how much did the dollar depreciate against yen?
On july 2,1997, the thai baht fell 17% against U.S. dollar. By how much has the
dollar appreciated against baht?
April 1,1998,was an ill-fated date in yugoslavia. On the day, the govt. devalued
Yugoslav dinar , setting its new rate at 10.92 dinar from 6.0 dinar previously. By
how much has the dinar depreciated against dollar? By how much has the dollar
devalued against the dinar?