EC 200-B01

Value of the dollar
Exchange rate

  • $1 = 500 colones
    product made in USA @ $20per.
    how much would product sell for in Costa Rica?
    $20 500/$1 = 10,000 colones
  • 1000c in Costa Rica, what is cost in USA?
    1000c x $1/500c = $2
  • if $2 = 500c then
    product in US costs $20
    $20 x 500/2 = 5000
    1000c x $2/500c = $4
  • discussion of tariffs (taxes) & quotas (production limits)
  • WTO, MFN (World Trade Org, Most Favored Nation)
  • infant industry argument
  • where does comparative advantage come from? govt action
  • what determines the value of $$?
  • price of € to $
  • demand for an economy’s products, investments, etc drives exchange fluctuations (currency valuation)
  • foreign investment
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