The world has a global economy. It’s no longer possible to survive as an isolationist. Macroeconomics will tell you that it is most efficient to have each country produce what it can produce cheapest so that all may prosper due to lower-cost goods and increased production. Not surprisingly, the U.S. is the world’s largest importer and also it is no surprise that we import a lot of stuff from China. According to the U.S. Census bureau, in 2018, we imported $539,675.6 Billion worth of goods from China while only exporting $120,148.1 Billion to China for a total trade of $659,823.7. So, in many ways Canada is actually a better trading partner than China since although we imported $318,824.2 … [Read more...]
How the Currency Exchange Rate Can Affect Business
In finance, an exchange rate is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country's currency in relation to another currency.~Wikipedia Currency depreciation happens when a nation’s currency exchange rate (e.g. the Chinese Yuan) decreases in value in comparison to another country’s currency (e.g. the U.S. Dollar). So, if the dollar increases in value compared to the Yuan, it means U.S. based businesses or individuals could receive more for their money from an overseas supplier than they did previously, even if the price in the foreign currency is unchanged. On the other hand, Chinese companies will pay more for … [Read more...]
How does the “Falling Dollar” and the exchange rate affect Inflation?
With all the recent talk about the "falling dollar" will that affect the inflation rate? Let's start with the basics. 1) Price inflation is primarily caused by monetary inflation. In other words as the money supply increases things cost more. See What is Inflation? for a full explanation. 2) The government controls the money supply to a certain extent through tightening or loosening credit. 3) The economy is extremely complex and many other factors come into play. Such as international exchange and the supply and demand for goods and services. At first blush it might appear that the falling dollar would cause deflation because the dollar is going down. But if the dollar is … [Read more...]