Send the link below via email or IMCopy
Present to your audienceStart remote presentation
- Invited audience members will follow you as you navigate and present
- People invited to a presentation do not need a Prezi account
- This link expires 10 minutes after you close the presentation
- A maximum of 30 users can follow your presentation
- Learn more about this feature in our knowledge base article
Do you really want to delete this prezi?
Neither you, nor the coeditors you shared it with will be able to recover it again.
Make your likes visible on Facebook?
Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.
Exchange Rate and Purchasing Power Parity
Transcript of Exchange Rate and Purchasing Power Parity
Find your currency "match" with your other classmates!
Appreciation vs Depreciation
Appreciation-dollars buys more foreign currency
Depreciation-dollar buys less foreign currency
Real Exchange Rate
Nominal Exchange Rate
rate at which a person can trade the currency of one country for the currency of another
Ex: 80 yen per US dollar
Ex: On June 20th, I exchanged $100 for 65 pounds when I went to London. I was able to buy 65 chocolates.
Yesterday, I went to the bank and exchanged $100 for 90 pounds in London. I was able to buy 90 chocolates.
Ex: On August 13th, I exchanged $60 for 20 pesos when I went to Mexico. I was able to buy 35 flowers.
Today, I exchanged $60 for......You tell me! :)
rate at which a person can trade the goods and services of one country for the goods and services of another.
Nominal exchange rate x Domestic Price
Real exchange rate= (nominal exchange rate * Price Index for US basket) divided by price index for foreign basket
Purchasing Power Parity
A unit of any given currency should be able to buy the same quantity of goods in all countries
**Determine exchange rates in the long run**
Implications: Nominal exchange rate between the currencies of two countries depends on the price levels of those countries.
1=units of foreign currency * price of a basket of goods in the United States divided by the price of a basket of goods in Japan
Implication: Nominal exchange rates change when price levels change