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Understanding Exchange Rates and Their Impact on Trade Balance

Explore the dynamics of exchange rates between strong and weak currencies, and how they influence trade balance. Learn how a strong dollar affects imports, exports, and the balance of trade over time, with a focus on the US from 1997 to 2004. Discover the implications of currency appreciation and depreciation on international trade relationships.

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Understanding Exchange Rates and Their Impact on Trade Balance

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  1. Exchange Rates:The price at which currency can be bought and sold ‘Strong’ vs. ‘Weak’ Currency

  2. Weak Dollar Strong Dollar Depreciated Value (foreign currency more valuable) Exports cheaper abroad (Balance of Trade improves) Imports more expensive Appreciate Value Exports expensive to foreign countries (who does that hurt?) Imports are cheaper (Trade Deficit)

  3. US Balance of Trade; 1997-2004

  4. US Balance of Payments; 2001

  5. Exchange Rates: The price at which currency can be bought and slod Which is strongest?

  6. When was the US $ stronger?

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